Back to top

Image: Bigstock

Will Core Business Units Boost McKesson's (MCK) Q3 Earnings?

Read MoreHide Full Article

McKesson Corporation’s (MCK - Free Report) third-quarter fiscal 2019 results are scheduled to release on Jan 31.

The company’s core business units — U.S. Pharmaceutical and Specialty Solutions, and European Pharmaceutical Solutions — are likely to boost the company’s quarterly performance.

Fiscal Q2 Results

McKesson reported second-quarter fiscal 2019 earnings of $3.60 per share, beating the Zacks Consensus Estimate of $3.28. Adjusted earnings improved 10% year over year.

Sales came in at $53.08 billion, which missed the Zacks Consensus Estimate of $53.56 billion. However, the metric rose 1.9% on a year-over-year basis.

In the trailing four quarters, McKesson has delivered a positive average earnings surprise of 6.4%.

McKesson Corporation Price and EPS Surprise

 

McKesson Corporation Price and EPS Surprise | McKesson Corporation Quote

Which Way Are Q3 Estimates Headed?

The Zacks Consensus Estimate for McKesson’s fiscal third-quarter earnings is pegged at $3.18, mirroring a 6.7% decline year over year. The same for revenues stands at $55.27 billion, reflecting an increase of 3.1% year over year.

Let’s see how things are shaping up prior to the earnings release.

Core Business Units to Drive Q3 Results

McKesson’s Pharmaceutical wing is likely to act as a key catalyst in boosting the company’s fiscal third-quarter results. Notably, the segment is likely to gain momentum on the back of its branded, generic and over-the-counter pharmaceuticals. This apart, McKesson’s Specialty business is likely to be a major top-line contributor, with strong growth in specialty drug distribution.

Not to forget, the company’s U.S. Pharmaceutical and Specialty Solutions contributed 70.4% to the company’s net revenues in the fiscal second quarter. For the quarter to be reported, the Zacks Consensus Estimate for the U.S. Pharmaceutical and Specialty Solutions is pegged at $43.01 billion, showing a sequential rise of 3.4%.

Other Factors at Play

European Pharmaceutical Solutions

Interestingly, despite stiff competition in France, the European Pharmaceutical revenues contributed 12.5% to McKesson’s net revenues in the fiscal second quarter.

The Zacks Consensus Estimate for European Pharmaceutical's third-quarter revenues is pinned at $6.85 billion, indicating a sequential increase of 3.2%.

Medical Surgical Solutions

This segment delivers laboratory supplies including reagents, lab equipment, lab glassware, eye wash solution, specimen collection and lab supplies. In the last reported quarter, the unit contributed 3.7% to the company’s net revenues.

For the quarter to be reported, the Zacks Consensus Estimate for the segment’s sales stands at $1.98 billion, reflecting a sequential increase of 1.7%.

What Does Our Model Say?

Our proven model clearly indicates that a stock needs to have both — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — to deliver a positive earnings surprise. This is not the case here.

Earnings ESP: McKesson has an Earnings ESP of -0.08%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: McKesson carries a Zacks Rank #3.

Please note that we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revision.

Stocks Worth a Look

Here are a few medical stocks worth considering as they have the right combination of elements to post an earnings beat in the upcoming releases:

PerkinElmer, Inc. has an Earnings ESP of +0.77% and a Zacks Rank #3.

Illumina, Inc. (ILMN - Free Report) has an Earnings ESP of +0.02% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

DexCom (DXCM - Free Report) has an Earnings ESP of +8.93% and a Zacks Rank #2.

Zacks' Top 10 Stocks for 2019

In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-holds for the year?

Who wouldn't? Our annual Top 10s have beaten the market with amazing regularity. In 2018, while the market dropped -5.2%, the portfolio scored well into double-digits overall with individual stocks rising as high as +61.5%. And from 2012-2017, while the market boomed +126.3, Zacks' Top 10s reached an even more sensational +181.9%.

See Latest Stocks Today >>


Unique Zacks Analysis of Your Chosen Ticker


Pick one free report - opportunity may be withdrawn at any time


McKesson Corporation (MCK) - $25 value - yours FREE >>

Illumina, Inc. (ILMN) - $25 value - yours FREE >>

DexCom, Inc. (DXCM) - $25 value - yours FREE >>

Published in