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Walgreens Boots Alliance (WBA +12%) is nicely aligned with investors today, roaring higher following the pharmaceutical retailer's decent-sized Q4 (Aug) earnings and revenue beats. WBA faced enormous setbacks over the past couple of years as its aggressive M&A and investment activity under its former CEO hindered earnings growth at a time when macroeconomic headwinds were intensifying, eviscerating front-store sales volumes.

Without improving economic conditions, WBA -- now under CEO Tim Wentworth since last October -- has already begun enacting sweeping changes. Last quarter, WBA announced the closure of 25% of its stores, with plans to shutter additional locations if performance does not improve. Today, WBA finalized these plans, targeting around 1,200 sites over the next three years (around 14% of total stores), including 500 in FY25. The company anticipates that the closures will be immediately accretive to adjusted EPS and free cash flow.

These actions, alongside several highlights from Q4, including benefits from previous restructuring programs, have sparked a buying frenzy today, fueling a breakout in the stock today as it clears its 50-day moving average (9.44) for the first time since last year.

• Today's central highlight was that WBA successfully achieved its three goals: cutting costs by over $1.0 bln, reducing CapEx by over $700 mln, and realizing over $600 mln in benefits from working capital initiatives. As a result of these early wins, WBA delivered a less pronounced contraction in its EPS yr/yr in Q4, registering a 42% drop to $0.39.
• WBA also recorded a decent 5.9% uptick in sales yr/yr to $37.5 bln, supported by strength across the board. U.S. Retail Pharmacy sales enjoyed a 6.5% jump on comps of +8.3%, led by the pharmacy side as retail sales continued to compress, reflecting a stubbornly challenging demand environment and persistent competitive pressures. In U.S. Healthcare, sales expanded by 7.1% yr/yr, led by Shields, which boasted a whopping 27.8% leap. International revenue edged 3.2% higher.
• A hindrance to top-line growth recently has been lower reimbursement from pharmacy benefit managers or PBMs like Caremark (CVS) and OptumRx (UNH). WBA has been working with PBMs to bring stability and predictability to its reimbursement, achieving high visibility into reimbursement for around 80% of the anticipated script volume in FY25.
• As a result, WBA issued bullish FY25 revenue guidance, predicting $147.0-151.0 bln, the midpoint of which was well ahead of consensus. Earnings will remain wobbly; WBA targeted $1.40-1.80 next year, the midpoint falling short of analyst expectations. However, WBA is focused on cash flow generation to improve its debt position and stabilize its core operations.

After so much turbulence, WBA's Q4 report was a welcomed change of pace. We noted yesterday that benefits from WBA's recent restructuring actions would likely be required before investors warmed up to WBA. Following its achievements in Q4, the market may be coming back around to WBA. However, given its recent history, investors may need to see more proof that Mr. Wentworth's changes are igniting a firm turnaround