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Here's Why You Should Retain McKesson (MCK) Stock Right Now
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McKessonCorporation (MCK - Free Report) is poised well 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 54.4% so far this year against the industry’s decline of 11.9%. The S&P 500 Index has fallen 20.6% in the same time frame.
McKesson — with a market capitalization of $54.4 billion — is a healthcare services and information technology company. Its earnings are anticipated to improve 10.1% over the next five years. The company beat earnings estimates in two of the trailing four quarters and missed twice, the average surprise being 4.79%. Its earnings yield of 6.5% also compares favorably with the industry’s 4.7%.
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 remaining share of its German joint venture to Walgreens Boots Alliance. McKesson 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 June, 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 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 analytic capabilities, and pave the way for a wider portfolio of clinical trials. The deal between McKesson and HCA was completed in October.
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. The divestiture of McKesson’s Austrian business also hurt its growth.
The company removed a major overhang during the fiscal first quarter by 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 the long-pending litigations that have been hurting the company’s goodwill, while also reducing legal expenses.
McKesson’s agreements with the U.S. government for COVID-19 vaccine distribution, kitting and storage programs and COVID-19 tests proved beneficial.
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. The company had to pay up to approximately $7.4 billion to the Settling Governmental Entities, per the settlement agreement.
Estimates Trend
For fiscal 2023, the Zacks Consensus Estimate for revenues is pegged at $275.4 billion, suggesting an improvement of 4.3% from the year-ago period’s reported figure. The same for adjusted earnings per share stands at $24.78, suggesting growth of 4.6% from the prior-year reported figure.
Estimates for ShockWave Medical’s 2022 and 2023 earnings per share have risen from $2.02 to $2.57 and from $2.95 to $3.42, respectively, in the past 60 days. SWAV has gained 62.7% so far this year. It delivered an earnings surprise of 180.14%, on average, in the last four quarters.
Estimates for Merit Medical Systems have improved from earnings of $2.47 to $2.57 for 2022 and from $2.77 to $2.82 for 2023, in the past 60 days. The company’s stock has risen 13.1% so far this year. Merit Medical Systems delivered an earnings surprise of 25.35% on average, in the last four quarters.
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Here's Why You Should Retain McKesson (MCK) Stock Right Now
McKessonCorporation (MCK - Free Report) is poised well 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 54.4% so far this year against the industry’s decline of 11.9%. The S&P 500 Index has fallen 20.6% in the same time frame.
McKesson — with a market capitalization of $54.4 billion — is a healthcare services and information technology company. Its earnings are anticipated to improve 10.1% over the next five years. The company beat earnings estimates in two of the trailing four quarters and missed twice, the average surprise being 4.79%. Its earnings yield of 6.5% also compares favorably with the industry’s 4.7%.
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 remaining share of its German joint venture to Walgreens Boots Alliance. McKesson 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 June, 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 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 analytic capabilities, and pave the way for a wider portfolio of clinical trials. The deal between McKesson and HCA was completed in October.
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. The divestiture of McKesson’s Austrian business also hurt its growth.
The company removed a major overhang during the fiscal first quarter by 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 the long-pending litigations that have been hurting the company’s goodwill, while also reducing legal expenses.
McKesson’s agreements with the U.S. government for COVID-19 vaccine distribution, kitting and storage programs and COVID-19 tests proved beneficial.
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. The company had to pay up to approximately $7.4 billion to the Settling Governmental Entities, per the settlement agreement.
Estimates Trend
For fiscal 2023, the Zacks Consensus Estimate for revenues is pegged at $275.4 billion, suggesting an improvement of 4.3% from the year-ago period’s reported figure. The same for adjusted earnings per share stands at $24.78, suggesting growth of 4.6% from the prior-year reported figure.
McKesson Corporation Price
McKesson Corporation price | McKesson Corporation Quote
Stocks to Consider
Some better-ranked stocks in the broader medical space are ShockWave Medical (SWAV - Free Report) and Merit Medical Systems (MMSI - Free Report) , carrying Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Estimates for ShockWave Medical’s 2022 and 2023 earnings per share have risen from $2.02 to $2.57 and from $2.95 to $3.42, respectively, in the past 60 days. SWAV has gained 62.7% so far this year. It delivered an earnings surprise of 180.14%, on average, in the last four quarters.
Estimates for Merit Medical Systems have improved from earnings of $2.47 to $2.57 for 2022 and from $2.77 to $2.82 for 2023, in the past 60 days. The company’s stock has risen 13.1% so far this year. Merit Medical Systems delivered an earnings surprise of 25.35% on average, in the last four quarters.