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Here's Why You Should Add McKesson (MCK) Stock Right Now
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McKessonCorporation (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 #2 (Buy) stock have gained 51.9% so far this year against the industry’s decline of 15.9%. The S&P 500 Index has fallen 18.4% in the same time frame.
The company — with a market capitalization of $52.29 billion — is a health care services and information technology company. Its earnings are anticipated to improve 10.1% over the next five years. The company beat earnings estimates in three of the trailing four quarters and missed once, the average surprise being 4.79%. The company’s earnings yield of 6.7% also compares favorably with the industry’s 5.1%.
Image Source: Zacks Investment Research
What’s Favoring It?
McKesson continues to actively pursue deals, divestitures and acquisitions to drive growth. In April 2022, the company completed the divestiture of its retail and distribution businesses in the United Kingdom to Aurelius. During the fiscal fourth quarter of 2022, the company completed the sale of its Austrian business to Quadrifolia management and the sale of its remaining share of its German joint venture to Walgreens Boots Alliance. The company is currently progressing with the divestiture of its European business. These divestitures will allow the company to focus on its key growth market — the United States.
In October, 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 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.
McKesson acquired privately-held prescription price transparency and benefit insight company, Rx Savings Solutions, for a total consideration of up to $875 million earlier this month. The total deal value includes an upfront payment of $600 million and up to $275 million in contingent consideration based on RxSS’ financial performance through the calendar year 2025.
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 second quarter of 2023, McKesson’s growth was led by its strong performance across all segments, except the International segment, which was marred by unfavorable currency movement and continued divesture of European businesses.
The company removed a major overhang during the fiscal first quarter by settling or signing a settlement agreement related to the opioid-related claims of all 50 states, as well as the District of Columbia and all eligible territories. These developments will close long-pending litigations that have been hurting the company’s goodwill and will also reduce legal expenses.
McKesson’s agreements with the U.S. government for COVID-19 vaccine distribution, kitting and storage programs and COVID-19 tests are an added benefit.
What’s Hurting the Stock?
McKesson’s broad settlement of opioid-related claims of states and municipalities is likely to drive expenses for the company in the short term. Moreover, price fluctuation of generic pharmaceuticals and stiff competition in the MedTech space are other headwinds.
Estimates Trend
For fiscal 2023, the Zacks Consensus Estimate for revenues is pegged at $274.5 billion, indicating an improvement of 4% from the year-ago period’s reported figure. The same for adjusted earnings per share stands at $24.76, suggesting growth of 4.5% from the prior-year reported figure.
Estimates for AMN Healthcare Services have improved from earnings of $11.26 to $11.43 for 2022 and from $8.30 to $8.39 for 2023 in the past 60 days. The AMN stock has declined 1.2% so far this year.
AMN Healthcare Services delivered an earnings surprise of 10.96%, on average, in the last four quarters.
Estimates for Lantheus’ earningsper share have increased from $3.57 to $3.82 for 2022 and from $4.01 to $4.21 for 2023 in the past 60 days. LNTH has gained 98.7% so far this year.
Lantheus has an earnings yield of 6.6% against a negative yield for the industry.
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Here's Why You Should Add McKesson (MCK) Stock Right Now
McKessonCorporation (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 #2 (Buy) stock have gained 51.9% so far this year against the industry’s decline of 15.9%. The S&P 500 Index has fallen 18.4% in the same time frame.
The company — with a market capitalization of $52.29 billion — is a health care services and information technology company. Its earnings are anticipated to improve 10.1% over the next five years. The company beat earnings estimates in three of the trailing four quarters and missed once, the average surprise being 4.79%. The company’s earnings yield of 6.7% also compares favorably with the industry’s 5.1%.
Image Source: Zacks Investment Research
What’s Favoring It?
McKesson continues to actively pursue deals, divestitures and acquisitions to drive growth. In April 2022, the company completed the divestiture of its retail and distribution businesses in the United Kingdom to Aurelius. During the fiscal fourth quarter of 2022, the company completed the sale of its Austrian business to Quadrifolia management and the sale of its remaining share of its German joint venture to Walgreens Boots Alliance. The company is currently progressing with the divestiture of its European business. These divestitures will allow the company to focus on its key growth market — the United States.
In October, 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 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.
McKesson acquired privately-held prescription price transparency and benefit insight company, Rx Savings Solutions, for a total consideration of up to $875 million earlier this month. The total deal value includes an upfront payment of $600 million and up to $275 million in contingent consideration based on RxSS’ financial performance through the calendar year 2025.
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 second quarter of 2023, McKesson’s growth was led by its strong performance across all segments, except the International segment, which was marred by unfavorable currency movement and continued divesture of European businesses.
The company removed a major overhang during the fiscal first quarter by settling or signing a settlement agreement related to the opioid-related claims of all 50 states, as well as the District of Columbia and all eligible territories. These developments will close long-pending litigations that have been hurting the company’s goodwill and will also reduce legal expenses.
McKesson’s agreements with the U.S. government for COVID-19 vaccine distribution, kitting and storage programs and COVID-19 tests are an added benefit.
What’s Hurting the Stock?
McKesson’s broad settlement of opioid-related claims of states and municipalities is likely to drive expenses for the company in the short term. Moreover, price fluctuation of generic pharmaceuticals and stiff competition in the MedTech space are other headwinds.
Estimates Trend
For fiscal 2023, the Zacks Consensus Estimate for revenues is pegged at $274.5 billion, indicating an improvement of 4% from the year-ago period’s reported figure. The same for adjusted earnings per share stands at $24.76, suggesting growth of 4.5% from the prior-year reported figure.
McKesson Corporation Price
McKesson Corporation price | McKesson Corporation Quote
Other Stocks to Consider
A couple of other top-ranked stocks in the broader medical space are AMN Healthcare Services (AMN - Free Report) and Lantheus (LNTH - Free Report) , all currently carrying a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Estimates for AMN Healthcare Services have improved from earnings of $11.26 to $11.43 for 2022 and from $8.30 to $8.39 for 2023 in the past 60 days. The AMN stock has declined 1.2% so far this year.
AMN Healthcare Services delivered an earnings surprise of 10.96%, on average, in the last four quarters.
Estimates for Lantheus’ earningsper share have increased from $3.57 to $3.82 for 2022 and from $4.01 to $4.21 for 2023 in the past 60 days. LNTH has gained 98.7% so far this year.
Lantheus has an earnings yield of 6.6% against a negative yield for the industry.