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Mckesson Corp. (MCK)
NYSE:MCK
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McKesson
(NYSE:MCK)
77Outperform
Positive Factors
Acquisition Impact
The PRISM acquisition is expected to contribute an estimated $90 million in EBITDA to McKesson's 2026 pro forma post-deal adjusted EBITDA.
Earnings Growth
The company's sustained ability to deliver on long-term EPS growth goals is a reason to justify multiple expansion that translates to stock upside from current levels.
Pharmaceutical Strength
US Pharma is clearly exiting FY25 from a position of strength and is set up for ongoing strong EBIT growth in FY26 as utilization remains strong, specialty assets shine, and recent acquisitions contribute to growth.
Negative Factors
Med-Surg Performance
Most of the focus on the upcoming earnings is expected to be on Med-Surg, which has been challenged of late.
Prescription Technology Solutions
Prescription Technology Solutions missed modestly on EBIT.
Valuation Concerns
While fundamentals remain strong, the valuation feels relatively full compared to significant discounts across much of the coverage universe.
McKesson (MCK) vs. S&P 500 (SPY)
Market Cap
$87.10B
Dividend Yield0.4%
Average Volume (3M)1.10M
Price to Earnings (P/E)31.6
Beta (1Y)0.23
Revenue Growth14.29%
EPS Growth-1.20%
CountryUS
Employees45,000
SectorHealthcare
Sector Strength69
IndustryMedical - Distribution
Share Statistics
EPS (TTM)21.82
Shares Outstanding125,326,380
10 Day Avg. Volume912,918
30 Day Avg. Volume1,098,606
Financial Highlights & Ratios
PEG RatioN/A
Price to Book (P/B)N/A
Price to Sales (P/S)0.24
Price to Cash Flow (P/CF)-8.70
P/FCF Ratio0.00
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$723.00Price Target Upside4.03% Upside
Rating ConsensusStrong Buy
Number of Analyst Covering12
McKesson Business Overview & Revenue Model
Company DescriptionMcKesson Corporation provides healthcare services in the United States and internationally. It operates through four segments: U.S. Pharmaceutical, International, Medical-Surgical Solutions, and Prescription Technology Solutions (RxTS). The U.S. Pharmaceutical segment distributes branded, generic, specialty, biosimilar, and over-the-counter pharmaceutical drugs and other healthcare-related products. This segment also provides practice management, technology, clinical support, and business solutions to community-based oncology and other specialty practices; and consulting, outsourcing, technological, and other services, as well as sells financial, operational, and clinical solutions to pharmacies. The International segment offers distribution and services to wholesale, institutional, and retail customers in 13 European countries and Canada. The Medical-Surgical Solutions segment provides medical-surgical supply distribution, logistics, and other services to healthcare providers. The RxTS segment serves biopharma and life sciences partners and patients to address medication challenges for patients throughout their journeys; connects pharmacies, providers, payers, and biopharma companies to deliver innovative access and adherence solutions; and provides third-party logistics and wholesale distribution support solutions. McKesson Corporation was founded in 1833 and is headquartered in Irving, Texas.
How the Company Makes MoneyMcKesson makes money through multiple revenue streams primarily centered around its role as a key distributor of pharmaceuticals, medical supplies, and healthcare technology solutions. The company's primary revenue comes from its Pharmaceutical Distribution & Services segment, which supplies branded, generic, and specialty drugs to retail pharmacies, hospitals, and healthcare providers. McKesson also generates revenue through its Medical-Surgical Solutions segment by providing medical-surgical supplies and equipment to healthcare facilities. Additionally, McKesson earns from its Technology Solutions segment, which offers software and automation solutions that help healthcare providers manage their operations more efficiently. Key partnerships with pharmaceutical manufacturers, healthcare providers, and retail pharmacies play a significant role in driving McKesson's earnings, as they enable the company to leverage its extensive distribution network and expertise in supply chain management.
McKesson Financial Statement Overview
Summary
McKesson demonstrates robust revenue growth and operational stability, with efficient EBIT and EBITDA margins. However, the balance sheet reflects high leverage with negative equity, posing risks. The cash flow is strong, but declining free cash flow growth could be a challenge. Overall, McKesson is performing well operationally, but needs to address balance sheet leverage to mitigate risk.Income Statement
McKesson shows strong revenue growth with a 11.52% increase in TTM (Trailing-Twelve-Months) compared to the previous year. The company has a stable Gross Profit Margin of 3.76% and a healthy Net Profit Margin of 0.82%. EBIT and EBITDA margins are solid at 1.23% and 1.37% respectively, indicating efficient operations. However, the net income has decreased slightly, which may warrant closer examination.85
Very Positive
Balance Sheet
The balance sheet reflects a high Debt-to-Equity Ratio due to negative equity, which is a concern for leverage risk. The Equity Ratio is low at 7.76%, indicating a high reliance on debt. Despite this, the company maintains a reasonable level of total assets, suggesting potential for asset utilization improvement.60
Neutral
Cash Flow
McKesson's cash flow statement reveals a strong Operating Cash Flow to Net Income Ratio of 0.88 and a Free Cash Flow to Net Income Ratio of 0.78, indicating good cash conversion. However, Free Cash Flow has declined by 38.91% from the previous year, suggesting potential challenges in sustaining cash flow growth.75
Positive
| Breakdown | |||||
| TTM | Mar 2024 | Mar 2023 | Mar 2022 | Mar 2021 | Mar 2020 |
|---|---|---|---|---|---|
| Income Statement | Total Revenue | ||||
| 344.58B | 308.95B | 276.71B | 263.97B | 238.23B | 231.05B | Gross Profit |
| 12.95B | 12.58B | 12.36B | 13.13B | 12.15B | 12.02B | EBIT |
| 4.24B | 3.91B | 4.38B | 2.85B | 3.52B | 1.66B | EBITDA |
| 4.95B | 4.67B | 5.74B | 3.11B | -3.60B | 2.31B | Net Income Common Stockholders |
| 2.83B | 3.00B | 3.56B | 1.11B | -4.34B | 900.00M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | ||||
| 1.13B | 4.58B | 4.68B | 3.53B | 6.28B | 4.01B | Total Assets |
| 71.08B | 67.44B | 62.32B | 63.30B | 65.02B | 61.25B | Total Debt |
| 9.76B | 7.39B | 7.29B | 7.54B | 9.40B | 9.40B | Net Debt |
| 8.63B | 2.81B | 2.62B | 4.01B | 3.13B | 5.39B | Total Liabilities |
| 73.78B | 69.04B | 63.81B | 65.09B | 63.57B | 54.54B | Stockholders Equity |
| 5.52B | -1.97B | -1.86B | -2.27B | -21.00M | 5.09B |
| Cash Flow | Free Cash Flow | ||||
| 2.21B | 3.63B | 4.60B | 3.90B | 3.90B | 3.87B | Operating Cash Flow |
| 2.48B | 4.31B | 5.16B | 4.43B | 4.54B | 4.37B | Investing Cash Flow |
| -1.09B | -1.07B | -542.00M | -89.00M | -415.00M | -579.00M | Financing Cash Flow |
| -2.08B | -3.34B | -4.37B | -6.32B | -1.69B | -2.73B |
McKesson Technical Analysis
Positive
695.00
Price Trends
656.54
Positive
623.22
Positive
586.10
Positive
Market Momentum
10.22
Positive
58.47
Neutral
66.06
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For MCK, the sentiment is Positive. The current price of 695 is above the 20-day moving average (MA) of 684.78, above the 50-day MA of 656.54, and above the 200-day MA of 586.10, indicating a bullish trend. The MACD of 10.22 indicates Positive momentum. The RSI at 58.47 is Neutral, neither overbought nor oversold. The STOCH value of 66.06 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for MCK.
McKesson Risk Analysis
McKesson disclosed 38 risk factors in its most recent earnings report. McKesson reported the most risks in the “Production” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
McKesson Peers Comparison
Overall Rating
UnderperformOutperform
Sector (51)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
77 Outperform | $87.10B | 31.55 | 51.23% | 0.40% | 14.29% | -1.20% | |
76 Outperform | $87.75B | 19.01 | 6.07% | 4.07% | 4.02% | -43.51% | |
74 Outperform | $31.68B | 10.22 | 12.59% | ― | 8.85% | 33.30% | |
73 Outperform | $55.44B | 40.18 | 245.32% | 0.74% | 11.64% | -23.54% | |
70 Outperform | $83.86B | 15.48 | -230.22% | 0.82% | 7.30% | ― | |
61 Neutral | $33.23B | 25.68 | -43.80% | 1.47% | 2.85% | 110.82% | |
51 Neutral | $5.32B | 3.41 | -40.36% | 2.89% | 17.93% | 2.52% |
* Healthcare Sector Average
Performance Comparison
MCK
McKesson
695.00
161.37
30.24%
COR
Cencora
285.90
48.11
20.23%
CAH
Cardinal Health
137.56
36.46
36.06%
CNC
Centene
57.69
-16.14
-21.86%
CVS
CVS Health
65.32
0.85
1.32%
HCA
HCA Healthcare
327.92
18.98
6.14%
McKesson Earnings Call Summary
Earnings Call Date: Feb 5, 2025 | % Change Since: 14.64% | Next Earnings Date: May 8, 2025
Earnings Call Sentiment Positive
The earnings call presented a strong financial performance with significant revenue and profit growth, driven by strategic acquisitions and expansions in specialty services. Despite challenges in the Medical Surgical segment and some revenue impacts due to formulary changes, the company's raised guidance and strong segment growth indicate a positive outlook.Highlights
Strong Revenue and Operating Profit Growth
Revenue grew 18% to $95.3 billion and adjusted operating profit increased 16% to $1.5 billion. Double-digit growth was observed across the U.S. Pharmaceutical and Prescription Technology Solutions segments.
Raised Full-Year Guidance
The full-year guidance for adjusted earnings per diluted share was raised from $32.40-$33 to $32.55-$32.95, representing 19% to 20% year-over-year adjusted EPS growth.
Expansion in Specialty Services
McKesson announced the acquisition of a controlling interest in PRISM Vision, a provider of ophthalmology and retina management services. This acquisition is expected to be accretive to EPS by $0.20 to $0.30 in the first 12 months post-closing.
Growth in Oncology and Biopharma Services
The oncology platform expanded with 2,750 providers across 640 sites of care. Prescription Technology Solutions segment saw 14% revenue growth and 22% operating profit growth, driven by access and affordability solutions.
Lowlights
Challenges in Medical Surgical Segment
Medical Surgical segment faced lower than anticipated volumes due to a softer illness season, impacting foot traffic in primary care sites. Revenues decreased by 3%.
Impact of Formulary Changes
There was an anticipated decline in certain brand volumes due to formulary changes by a retail national account customer, which impacted revenue.
Company Guidance
During McKesson's third-quarter fiscal 2025 earnings call, the company reported strong financial performance with an 18% increase in revenue to $95.3 billion and a 16% rise in adjusted operating profit to $1.5 billion. U.S. pharmaceutical and prescription technology solutions segments led the double-digit growth, while medical surgical growth lagged due to a softer illness season. The company updated its full-year guidance for adjusted earnings per diluted share to a range of $32.55 to $32.95, representing a 19% to 20% year-over-year increase. McKesson also announced the acquisition of a controlling interest in PRISM Vision to enhance its specialty services, contributing to a projected $0.20 to $0.30 accretion to adjusted earnings per diluted share in the first 12 months post-closing. The company remains confident in its strategic growth pillars, including oncology and biopharma services, and anticipates continued strong performance into fiscal 2026, with an affirmed long-term adjusted EPS target growth of 12% to 14%.Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.