Walgreens Boots Alliance vs. CVS Health: What's the Better Turnaround Play?

Pharmacy Industry Overview - Investing in pharmacy chains has been challenging recently, with Rite Aid filing for bankruptcy and larger rivals like Walgreens Boots Alliance and CVS Health facing uncertain futures [1] - Both companies have undergone management changes and are implementing turnaround strategies, creating uncertainty for investors [1] Walgreens Boots Alliance - Walgreens has lost 77% of its value over the past three years [2] - New CEO Tim Wentworth has implemented cost-cutting measures, including reducing the dividend and planning to close 1,200 stores [2] - The stock may have bottomed out, showing signs of recovery after beating revenue and adjusted EPS expectations in Q1 2025, with sales of $39.5 billion surpassing the $37.4 billion consensus estimate [3] - The company's 2025 goals include optimizing its footprint, controlling costs, and improving cash flow, which could strengthen its financial position [4] CVS Health - CVS stock has declined nearly 50% over the past three years, but its diversified business has helped it remain profitable despite rising medical costs [5] - New CEO David Joyner, with 37 years of healthcare and pharmacy benefits management experience, aims to improve stability and predictability [6] - CVS reported an operating profit of $832 million in Q3 2024, a significant drop from $3.7 billion a year earlier, but strong growth in its health services segment mitigated further declines [7] - The company's diversification provides flexibility, including potential spinoffs of underperforming business units to focus on high-growth areas [8] Comparison and Outlook - Walgreens may appeal to contrarian investors due to its low valuation, but it risks becoming a value trap as its pharmacy business struggles with increasing online competition [9] - CVS appears to be the better investment option, as it remains profitable and benefits from a more diversified business model, offering greater long-term potential despite ongoing uncertainties [10]