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McKesson Corporation (MCK - Analyst Report) reiterated its earnings guidance for fiscal 2014 (ending Mar 31, 2014) at its analyst day on Jun 26, 2013.

McKesson continues to expect earnings (excluding special items) from continuing operations in the range of $7.90-$8.20 per share in fiscal 2014. The Zacks Consensus Estimate for fiscal 2014 currently stands at $8.07, within management’s guidance.

McKesson expects pharmaceutical distribution business to double in the next decade. On the fourth quarter fiscal 2013 earnings conference call, McKesson stated that it expects revenue in its major segment, Distribution Solutions, to rebound due to addition of PSS Medical, and increased demand from existing customers.

We note that McKesson completed its acquisition of PSS World Medical in Feb 2013. PSS World Medical was merged with McKesson’s Medical Surgical Distribution business.

We are impressed by the company’s efforts to broaden its portfolio through strategic acquisitions. The addition of PSS Medical business should boost the portfolio. However, generic launches are expected to be slower in 2013 compared to 2012. Fiscal 2014 will be challenging due to the low level of generic launches. Nevertheless, McKesson expects generics to grow by 2% – 4% in the next several years.

Moreover, growth in the Technology Solutions segment is also expected to accelerate from fiscal 2013 levels primarily due to the impact of acquisitions.

McKesson undertook a number of strategic actions in the fourth quarter of fiscal 2013 to combat the challenges that it expects to face in fiscal 2014.

McKesson decided to exit to minority investment in Nadro, a privately held pharmaceutical distributor in Mexico, where the company has a 49% stake. McKesson has also decided to realign its structure in the Technology Solutions segment to focus on its core competencies.

Meanwhile, the search for a new chief financial officer is on following the resignation of Jeffrey C. Campbell from the post.

McKesson currently carries a Zacks Rank #3 (Hold). Right now, AmerisourceBergen (ABC - Analyst Report), Santarus, Inc. and Salix Pharmaceutical (SLXP - Analyst Report) look well placed. While Salix Pharma and Santarus carry a Zacks Rank #1 (Strong Buy), AmerisourceBergen carries a Zacks Rank #2 (Buy).

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