PCE Data from November 2024 w.r.t. Walgreens Boots Alliance $WBA is bullish

By Jeffrey Cohen
1/3/2025 - in anticipation of earnings a week from now (Jan 10, 2025 at 7am ET)

Conclusion: Looking for a strong earnings release

Physician and other medical services are growing 2x the US PCE rate, and Walgreens has made strategic investments into those areas that may start to show signs of paying off. They should show growth and profitability in this segment.

Pharmacy sales (prescription and OTC) are growing faster than overall economy for the quarter (6.7% vs. 5.4%) and should be bullish for Walgreens. This trajectory slowed to PCE growth rates in November.

Retail (front of store) will be a drag on growth. It grew more slowly than overall PCE.
​

We are looking at the December 2024 publication of November 2024 Personal Consumption Expenditure information (also called Powell's favorite metric, and PCE).

We highlight in a spreadsheet (which we download from the US Government data source), all of the rows of things that Walgreens provides. We compare that for a few periods (e.g., prior three months vs. same prior three months a year ago; prior month vs. prior month a year ago; and sometimes we go back a few years).

​

Overall PCE (or Expenditures) are up 5.43% Year on Year for the quarter (3 months). Expenditures are up 5.45% for just November Year on Year. That sets the baseline. If pharmaceutical sales are up more than 5.44% (the average), then they are growing faster than the retail economy and the profits should be 'rolling in.' In this analysis we are ignoring the size of each category, but it does matter and things like pharmaceutical sales are more important than newspapers and we keep that in mind.

​1. Pharmaceutical products (including prescription and non-prescription drugs) is up 6.7% for the quarter YoY, and 5.3% for November YoY. This will be a strong quarter for the pharmacy and OTC drug sales areas.
​
Quarter YoY growth rates on consumable products:

​Food and non-alcoholic beverages purchased for off-premise consumption 3%
Games 6%
Film 5%
Cleaning products 4%
Paper products 3%
Personal Care Products 4%
Tobacco (4%) minus 4%
Magazines 6%
​Photo Processing (the service) 1%

Quarter YoY growth rates on Health Care Services:
Physician services 9%
Medical Labs 9%
Other professional medical service3s 11%

Implications:
Walgreens should show a strong quarter, with faster than overall economic growth, in their US pharmacy department. They should also show strong growth in their Village MD and other doctor, lab services, and clinical trial services. Those areas are growing twice the US average, and should be a large tail-wind.

The retail store is flat to slower growth than the overall economy. Non-alcoholic beverages and tobacco were especially weak.
​

Given the push to highlight and grow physician and other medical services, and the economic growth moving into those areas, this is bullish for Walgreens strategy and financial results to be reported next Friday, January 10, 2025 at 7am ET. Link to Walgreens Notice here: 

We know there are is a huge short position against Walgreens, and the stock was the worst performer in the S&P 500 in 2024. Good luck to all.