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Here's Why You Should Retain McKesson (MCK) Stock Right Now
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McKesson Corporation (MCK - Free Report) is well-poised for growth, backed by strategic collaborations and strength in the distribution solutions segment. However, the company’s opioid-related litigation expenses pose a threat.
Shares of this Zacks Rank #3 (Hold) stock have gained 32.6% so far this year against the industry’s decline of 15%. The S&P 500 Index has fallen 20% in the same time frame.
The company — with a market capitalization of $47.31 billion — is a health care services and information technology company. It anticipates earnings to improve 7.1% over the next five years. The company beat earnings estimates in three of the trailing four quarters and missed once, the average surprise being 19.5%.
What’s Favoring It?
McKesson continues to actively pursue deals, divestitures and acquisitions to drive growth. In the fiscal fourth quarter of 2022, the company closed the divestiture of its retail and distribution businesses in the U.K. to Aurelius. During the same period, the company completed the sale of its Austrian business to Quadrifolia management and the sale of McKesson's remaining share of its German joint venture to Walgreens Boots Alliance.
Last month, McKesson formed a joint venture with HCA Healthcare (HCA - Free Report) to create a fully integrated oncology research organization. Per the deal, McKesson and HCA Healthcare will integrate their respective research units — US Oncology Research (USOR) and Sarah Cannon Research Institute (SCRI). The newly created entity with the combined capabilities of SCRI and USOR is expected to boost clinical research, ramp up the development of drugs, lead to better data and analytics capabilities, and pave the way for a wider portfolio of clinical trials. The deal between McKesson and HCA Healthcare is likely to be completed later this year.
Image Source: Zacks Investment Research
McKesson is a major player in the pharmaceutical and medical supplies distribution market. The Distribution Solutions segment caters to a wide range of customers and businesses and stands to benefit from increased generic utilization, inflation in generics, courtesy of several patent expirations in the next few years, and an aging population.
During the fiscal fourth-quarter 2022 earnings call, McKesson’s growth was led by its strong performance across all segments. Although the company’s International segment showed recovery, the divestiture of McKesson’s Austrian business hurt growth.
Again, through Mar 31, the company successfully distributed more than 380 million Moderna and Johnson & Johnson COVID-19 vaccines on behalf of the U.S. government, including vaccine distribution in the country and the U.S. government’s international donation mission. In fact, in January, the United States government extended the existing COVID-19 vaccine distribution contract through July 2022 (approximately in line with McKesson’s fiscal first quarter of 2023).
The company continues to reap benefits from the COVID-related programs in Canada and Europe.
What’s Hurting the Stock?
With respect to the company’s corporate segment, it incurred $26 million in opioid-related litigation in the fiscal fourth quarter and $130 million in fiscal 2022. In the quarter under review, the company finalized the broad settlement of opioid-related claims of states and municipalities.
Estimates Trend
For fiscal 2024, the Zacks Consensus Estimate for revenues is pegged at $274.2 billion, indicating an improvement of 3.6% from the year-ago period’s reported figure. The same for adjusted earnings per share stands at $25.36, suggesting growth of 9.1% from the prior-year reported figure.
Stocks to Consider
Some better-ranked stocks in the broader medical space are Masimo Corporation (MASI - Free Report) and Patterson Companies (PDCO - Free Report) .
Masimo’s estimated earnings growth rate for second-quarter 2022 is pegged at 26.6%. The company’s earnings yield is 3.4% against the industry’s (8.5%).
Patterson Companies surpassed earnings estimates in each of the trailing four quarters, the average surprise being 16.5%. The company currently carries a Zacks Rank #2.
Patterson Companies’ long-term earnings growth rate is estimated at 9.6%. The company’s earnings yield of 7.5% compares favorably with the industry’s 4.5%.
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Here's Why You Should Retain McKesson (MCK) Stock Right Now
McKesson Corporation (MCK - Free Report) is well-poised for growth, backed by strategic collaborations and strength in the distribution solutions segment. However, the company’s opioid-related litigation expenses pose a threat.
Shares of this Zacks Rank #3 (Hold) stock have gained 32.6% so far this year against the industry’s decline of 15%. The S&P 500 Index has fallen 20% in the same time frame.
The company — with a market capitalization of $47.31 billion — is a health care services and information technology company. It anticipates earnings to improve 7.1% over the next five years. The company beat earnings estimates in three of the trailing four quarters and missed once, the average surprise being 19.5%.
What’s Favoring It?
McKesson continues to actively pursue deals, divestitures and acquisitions to drive growth. In the fiscal fourth quarter of 2022, the company closed the divestiture of its retail and distribution businesses in the U.K. to Aurelius. During the same period, the company completed the sale of its Austrian business to Quadrifolia management and the sale of McKesson's remaining share of its German joint venture to Walgreens Boots Alliance.
Last month, McKesson formed a joint venture with HCA Healthcare (HCA - Free Report) to create a fully integrated oncology research organization. Per the deal, McKesson and HCA Healthcare will integrate their respective research units — US Oncology Research (USOR) and Sarah Cannon Research Institute (SCRI). The newly created entity with the combined capabilities of SCRI and USOR is expected to boost clinical research, ramp up the development of drugs, lead to better data and analytics capabilities, and pave the way for a wider portfolio of clinical trials. The deal between McKesson and HCA Healthcare is likely to be completed later this year.
Image Source: Zacks Investment Research
McKesson is a major player in the pharmaceutical and medical supplies distribution market. The Distribution Solutions segment caters to a wide range of customers and businesses and stands to benefit from increased generic utilization, inflation in generics, courtesy of several patent expirations in the next few years, and an aging population.
During the fiscal fourth-quarter 2022 earnings call, McKesson’s growth was led by its strong performance across all segments. Although the company’s International segment showed recovery, the divestiture of McKesson’s Austrian business hurt growth.
Again, through Mar 31, the company successfully distributed more than 380 million Moderna and Johnson & Johnson COVID-19 vaccines on behalf of the U.S. government, including vaccine distribution in the country and the U.S. government’s international donation mission. In fact, in January, the United States government extended the existing COVID-19 vaccine distribution contract through July 2022 (approximately in line with McKesson’s fiscal first quarter of 2023).
The company continues to reap benefits from the COVID-related programs in Canada and Europe.
What’s Hurting the Stock?
With respect to the company’s corporate segment, it incurred $26 million in opioid-related litigation in the fiscal fourth quarter and $130 million in fiscal 2022. In the quarter under review, the company finalized the broad settlement of opioid-related claims of states and municipalities.
Estimates Trend
For fiscal 2024, the Zacks Consensus Estimate for revenues is pegged at $274.2 billion, indicating an improvement of 3.6% from the year-ago period’s reported figure. The same for adjusted earnings per share stands at $25.36, suggesting growth of 9.1% from the prior-year reported figure.
Stocks to Consider
Some better-ranked stocks in the broader medical space are Masimo Corporation (MASI - Free Report) and Patterson Companies (PDCO - Free Report) .
Masimo beat earnings estimates in each of the trailing four quarters, the average surprise being 4.4%. The company currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Masimo’s estimated earnings growth rate for second-quarter 2022 is pegged at 26.6%. The company’s earnings yield is 3.4% against the industry’s (8.5%).
Patterson Companies surpassed earnings estimates in each of the trailing four quarters, the average surprise being 16.5%. The company currently carries a Zacks Rank #2.
Patterson Companies’ long-term earnings growth rate is estimated at 9.6%. The company’s earnings yield of 7.5% compares favorably with the industry’s 4.5%.