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McKesson Corporation (MCK - Free Report) recently reaffirmed its fiscal 2012 guidance and still expects double digit earnings growth. This Zacks #1 Rank (strong buy) his a value stock with a forward P/E of only 13.4.

McKesson is one of the largest drug distributors in the United States. It also provides healthcare services to hospitals, physician offices, pharmacies and drug companies.

McKesson Surprised By 4% in the Fiscal Fourth Quarter of 2011

On May 3, McKesson reported fiscal fourth quarter 2011 results and beat the Zacks Consensus by 6 cents. Earnings per share were $1.66 compared to the consensus at $1.60 per share.

Revenue rose 8% to $28.9 billion from $26.6 billion in the fourth quarter a year ago. Distribution Solutions gained 8% in the quarter while Technology Services revenue rose 7%.

During fiscal 2011, the company completed the $2.2 billion acquisition of US Oncology which will boost the Distribution Solutions division.

Rewarding Shareholders

McKesson bought back $2.1 billion in stock in fiscal 2011. It also paid $171 million in dividends.

The Board of Directors has authorized another repurchase in fiscal 2012 of up to $1.5 billion in stock.

It also increased the quarterly dividend to 20 cents from 18 cents, which is currently a yield of 1%.

Guidance Re-Affirmed

On June 16, ahead of its analyst meeting, McKesson reaffirmed the guidance laid out in its May 3 press release regarding its fourth quarter results.

In May, it expected the positive trends from fiscal 2011 to continue.

It expects earnings per share between $5.55 and $5.75.

Analysts are even more bullish. The fiscal 2012 Zacks Consensus Estimate has risen to $6.09 from $5.63 per share in the last 60 days, with 2 estimates moving higher in just the last month.

This is earnings growth of 24.4%.

Valuation Still Attractive

Shares have taken off and are now well above the pre-recession highs. Check out the 5-year chart.

Still, there is value in McKesson shares.

In addition to a P/E under 15, which is my cut-off for "value", it also has a price-to-book of 2.9. A P/B under 3.0 usually designates "value."

Another strong value signal is a price-to-sales (P/S) ratio under 1.0. McKesson has a P/S ratio of only 0.2.

Additionally, investors get a solid return on equity (ROE) of 18.4%.

McKesson is a play on healthcare that is producing double digit earnings growth while also letting investors get in on the cheap with its outstanding value characteristics.

Tracey Ryniec is the Value Stock Strategist for She is also the Editor of the Turnaround Trader and Insider Trader services. You can follow her at

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