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McKesson to Gain From Distribution Business Amid Pricing Woes
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On Sep 15, we issued an updated research report on San Francisco, CA-based McKesson Corporation (MCK - Free Report) , a health care services and information technology company. The stock currently carries a Zacks Rank #3 (Hold).
Over the past month, McKesson has been trading above the broader industry. Per the last trading price, the stock has gained 2.6%, higher than the broader market’s gain of 2.3%. The company continues to witness strong growth in pharma and biotech backed by solid market fundamentals and planned growth strategy. The raised 2017 guidance is also encouraging.
McKesson delivered disappointing results in the recently reported first-quarter fiscal 2018, wherein adjusted earnings and revenues missed the Zacks Consensus Estimate. The quarter saw strong performance by the Distribution Solutions segment. The segment is expected to remain consistent with its performance in fiscal 2018 despite weak pricing trends and customer consolidation. To boost growth, the company recently acquired CoverMyMeds for approximately $1.1 billion.
Coming to guidance, the Distribution Solutions business revenue growth is expected to witness robust growth on a year-over-year basis. The upside is expected to be driven by market growth and acquisitions. McKesson expects GAAP earnings per diluted share of $7.10-$9.00 for the fiscal ending Mar 31, 2018. Adjusted earnings for the same period are expected in the range of $11.80-$12.50 per diluted share.
On the flipside, pricing pressure in the independent retail pharmacy channel is a headwind. McKesson entered fiscal 2018 with an assumption of branded inflation in the mid-single digits and its first quarter slightly surpassed expectations.
McKesson has been witnessing increased price competition in the independent retail pharmacy channel, which eventually resulted in reduced volumes. The company continues to witness a competitive market for selling generic pharmaceuticals in the United States. However, it expects to overcome the independent pharmacy sell-side pricing impact by the end of second-quarter fiscal 2018.
Cutthroat competition in the niche markets, currency headwinds and reimbursement issues remain challenges.
Estimate Revision Trend
The estimate revision trend for McKesson has been unfavorable at the moment. For the current quarter, six analysts moved south compared to no movement in the opposite direction over the last two months. As a result, magnitude of full-year estimates fell 4.8% to $2.76.
Key Picks
A few better-ranked medical stocks in the medical sector are Edwards Lifesciences Corporation (EW - Free Report) , Lantheus Holdings, Inc (LNTH - Free Report) and IDEXX Laboratories, Inc (IDXX - Free Report) . Edwards Lifesciences sports a Zacks Rank #1 (Strong Buy), while Lantheus Holdings and IDEXX carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Edwards Lifesciences has a long-term expected earnings growth rate of 15.2%. The stock has rallied roughly 19.9% in the last six months.
Lantheus Holdings has a long-term expected earnings growth rate of 12.5%. The stock has gained 40.7% in the last six months.
IDEXX has a long-term expected earnings growth rate of 19.8%. The stock has gained around 4.7% in the last six years.
New Report: An Investor’s Guide to Cybersecurity
Cyberattacks have become more frequent and destructive than ever. In fact, they’re expected to cause $6 trillion per year in damage by 2020.
The cybersecurity industry is expanding quickly in response to these threats. In fact, a projected $170 billion per year will be spent to protect consumer and corporate assets. Zacks has just released Cybersecurity: An Investor’s Guide to Locking Down Profits which reveals 4 promising investment candidates.
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McKesson to Gain From Distribution Business Amid Pricing Woes
On Sep 15, we issued an updated research report on San Francisco, CA-based McKesson Corporation (MCK - Free Report) , a health care services and information technology company. The stock currently carries a Zacks Rank #3 (Hold).
Over the past month, McKesson has been trading above the broader industry. Per the last trading price, the stock has gained 2.6%, higher than the broader market’s gain of 2.3%. The company continues to witness strong growth in pharma and biotech backed by solid market fundamentals and planned growth strategy. The raised 2017 guidance is also encouraging.
McKesson delivered disappointing results in the recently reported first-quarter fiscal 2018, wherein adjusted earnings and revenues missed the Zacks Consensus Estimate. The quarter saw strong performance by the Distribution Solutions segment. The segment is expected to remain consistent with its performance in fiscal 2018 despite weak pricing trends and customer consolidation. To boost growth, the company recently acquired CoverMyMeds for approximately $1.1 billion.
Coming to guidance, the Distribution Solutions business revenue growth is expected to witness robust growth on a year-over-year basis. The upside is expected to be driven by market growth and acquisitions. McKesson expects GAAP earnings per diluted share of $7.10-$9.00 for the fiscal ending Mar 31, 2018. Adjusted earnings for the same period are expected in the range of $11.80-$12.50 per diluted share.
On the flipside, pricing pressure in the independent retail pharmacy channel is a headwind. McKesson entered fiscal 2018 with an assumption of branded inflation in the mid-single digits and its first quarter slightly surpassed expectations.
McKesson has been witnessing increased price competition in the independent retail pharmacy channel, which eventually resulted in reduced volumes. The company continues to witness a competitive market for selling generic pharmaceuticals in the United States. However, it expects to overcome the independent pharmacy sell-side pricing impact by the end of second-quarter fiscal 2018.
Cutthroat competition in the niche markets, currency headwinds and reimbursement issues remain challenges.
Estimate Revision Trend
The estimate revision trend for McKesson has been unfavorable at the moment. For the current quarter, six analysts moved south compared to no movement in the opposite direction over the last two months. As a result, magnitude of full-year estimates fell 4.8% to $2.76.
Key Picks
A few better-ranked medical stocks in the medical sector are Edwards Lifesciences Corporation (EW - Free Report) , Lantheus Holdings, Inc (LNTH - Free Report) and IDEXX Laboratories, Inc (IDXX - Free Report) . Edwards Lifesciences sports a Zacks Rank #1 (Strong Buy), while Lantheus Holdings and IDEXX carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Edwards Lifesciences has a long-term expected earnings growth rate of 15.2%. The stock has rallied roughly 19.9% in the last six months.
Lantheus Holdings has a long-term expected earnings growth rate of 12.5%. The stock has gained 40.7% in the last six months.
IDEXX has a long-term expected earnings growth rate of 19.8%. The stock has gained around 4.7% in the last six years.
New Report: An Investor’s Guide to Cybersecurity
Cyberattacks have become more frequent and destructive than ever. In fact, they’re expected to cause $6 trillion per year in damage by 2020.
The cybersecurity industry is expanding quickly in response to these threats. In fact, a projected $170 billion per year will be spent to protect consumer and corporate assets. Zacks has just released Cybersecurity: An Investor’s Guide to Locking Down Profits which reveals 4 promising investment candidates.
Download the new report now>>