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McKesson Posts Stellar Q2 Results; Shares Up 3%

McKesson (MCK) shares rose by 3% during the extended trading session on November 1, after the company delivered better-than-expected Q2 results. MCK also raised its FY 2022 guidance, surpassing analyst expectations.

McKesson is a U.S.-based healthcare company involved in pharmaceutical distribution and provides health information technology, medical supplies, and care management tools.

The company saw robust performance across all segments, leading to double-digit adjusted operating profit growth. Notably, contributions from COVID-19 vaccine distribution and storage programs with the U.S. government, coupled with growth in the Medical-Surgical Solutions segment led to MCK outperforming analyst expectations.

Notably, adjusted earnings of $6.15 per share grew 28% year-over-year and easily beat analysts’ expectations of $4.62 per share. The company reported earnings of $4.80 per share in the same quarter last year.

Similarly, Q2 revenues jumped 9% year-over-year to $66.6 billion, exceeding consensus estimates of $63.22 billion. (See McKesson stock charts on TipRanks)

The increase in revenues reflected an 11% surge in the U.S. Pharmaceutical segment, driven by higher specialty volumes and market growth. Furthermore, revenues for the Medical-Surgical Solutions segment surged 23%, primarily due to higher sales of COVID-19 tests and growth in the primary care business.

In addition, the Prescription Technology Solutions segment revenues grew by 40% to $932 million, which can be attributed to growth in prescription volumes, coupled with increased volumes of technology and service offerings.

MCK has also raised its guidance for FY 2022, based on robust Q2 results and an optimistic outlook for the second half of the year. The company now forecasts adjusted earnings to be in the range of $21.95 to $22.55 per share, while the consensus estimate is pegged at $20.32 per share. The newly guided EPS implies a growth rate of 27.5% to 31% compared to FY 2021.

Previously, the company expected adjusted earnings to fall in the range of $19.80 to $20.40 per share.

McKesson CEO Brian Tyler commented, “We remain committed to investing in our growth strategies of biopharma services and oncology ecosystems, while simultaneously increasing shareholder returns.”

Overall, the stock has a Moderate Buy consensus rating based on 5 Buys and 2 Holds. The average McKesson price target of $243 implies 16.78% upside potential from current levels. Shares of MCK have jumped 37% over the past year.

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