Ready for a hidden gem that outperformed much of the market last year? Check out McKesson (NYSE: MCK), a healthcare market selection that isn’t talked about enough. That’s fine, as I am bullish on McKesson stock, and it could be a secret weapon in your portfolio in 2023.
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Headquartered in Texas, McKesson is a diversified healthcare services provider. The covered services include medical technology, clinical support, provision of pharmaceuticals, and surgical supply distribution.
Even if you’ve never heard of McKesson before, you’ll certainly be familiar with the company’s famous partner in the pharmaceutical industry. Analysts, growth, value, and income investors could all easily find reasons to start a position in McKesson stock.
McKesson Stock Outperformed While Other Stocks Struggled
For many investors, 2022 will be remembered as a rough year. Folks who held shares of technology companies certainly didn’t have an easy time. On the other hand, McKesson stockholders were on “Easy Street,” gaining 51.85% in 12 months.
Does this mean that it’s time for MCK stock to take a breather in 2023? Not necessarily, as McKesson shares don’t appear to be overpriced even after last year’s stunning rally. McKesson’s P/E ratio is reasonable at 26.6x, and the stock’s beta is quite low at 0.42.
In other words, MCK stock isn’t volatile, and it still looks like a pretty good bargain at the current price. Plus, McKesson pays a 0.54% annual dividend yield. That’s not life-changing, but it’s a nice added bonus for income investors.
By the way, McKesson’s business operations aren’t limited to the U.S. In fact, this is a large North American company with a healthcare market presence in Canada. Hence, prospective investors should take this into consideration.
McKesson Extended its Partnership with CVS Health
Among McKesson’s most important roles is to help pharmaceutical companies distribute medicines to people who need them. Therefore, it’s great news that McKesson will continue to work with an industry giant, CVS Health (NYSE: CVS).
In the U.S., CVS is royalty among retail pharmacy store chains. Yet, CVS can’t be expected to deliver potentially life-saving drugs without some assistance. That’s where McKesson comes in, as the company has agreed to “extend its partnership with CVS Health to distribute pharmaceuticals to mail order and specialty pharmacies, retail pharmacies and distribution centers through June 2027.”
Consider the implications of this. If everything works out as planned, McKesson will continue to have a significant revenue source through mid-2027. McKesson CEO Brian Tyler is quite proud of this extended collaboration, of course. With CVS Health, Tyler asserts, McKesson will “continue developing value propositions for patients utilizing our diverse set of differentiated assets and capabilities.”
McKesson’s Financials Held Steady During a Challenging Year
In 2022, when inflation was peaking and supply chains were disrupted, many U.S. businesses struggled just to survive. McKesson demonstrated its resilience during this challenging time with financials that remained solid and steady.
Here’s the proof: during Fiscal 2023’s second quarter, McKesson generated $70.16 billion in revenue, up 5% year-over-year. Again, if that pace of revenue growth from such a large revenue base doesn’t impress you, just remember how difficult the macroeconomic environment was in 2022.
During that same quarter, McKesson reported $6.06 in adjusted earnings per diluted share, down 1% year-over-year. In other words, the company held steady while so many companies floundered; this is impressive when taken in context.
Perhaps best of all, McKesson raised its Fiscal 2023 guidance for adjusted earnings per diluted share from a range of $23.95 to $24.65 to a range of $24.45 to $24.95. This reflects “operating business performance and increased contribution from the U.S. government’s COVID-19 vaccine distribution, kitting, and storage programs and COVID-19 tests.” Clearly, it’s positive that the government still counts on McKesson to facilitate the supply chain for COVID-19 vaccines and other items.
Is MCK Stock a Buy, According to Analysts?
Turning to Wall Street, MCK is a Strong Buy based on eight Buys and two Hold ratings – and notably, no Sell ratings. Furthermore, the average McKesson price target is $425.30, implying 13.6% upside potential.
Conclusion: Should You Consider McKesson Stock?
What type of investments are you looking for in 2023? If you’re looking for modest growth and resiliency, you should consider MCK. Besides, MCK stock has no Sell ratings and exhibits a powerful upward price trajectory.
