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Here's Why You Should Retain McKesson (MCK) Stock Right Now

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McKesson Corporation (MCK - Free Report) is well-poised for growth backed by its robust distribution solutions segment and strategic collaborations. However, an increase in branded price remains a concern.

The stock has gained 12.1%, compared with the industry’s growth of 6.9% on a year-to-date basis. Also, the S&P 500 Index has increased 13.3% in the same time frame.

McKesson — with a market capitalization of $30.84 billion — is a health care services and information technology company. It anticipates earnings to improve 6.9% over the next five years. Moreover, the company has a trailing four-quarter earnings surprise of 13.5%, on average.

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Let’s take a closer look at the factors that substantiate the company’s Zacks Rank #3 (Hold).


McKesson distributes generic pharmaceuticals, which are subject to price fluctuation. The Distribution Solutions segment experienced weaker generic pharmaceutical pricing trends, which continue to persist. Per the fiscal fourth-quarter 2021 earnings call, on the basis of manufacturer price actions taken in January, the company anticipates branded pharmaceutical pricing to increase around mid-single digit percent range, which is in line with fiscal 2021.

Key Catalysts

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 owing to several patent expirations in the next few years and an aging population.

Per the fiscal-fourth quarter 2021 earnings call, the company is prepared to support the distribution of additional vaccines as they come to market. Through April, McKesson has successfully distributed above 150 million Moderna and J&J COVID-19 vaccines to administration sites in the United States and remains on track with the U.S. government's distribution schedule.

Additionally, through April, the company has managed to assemble enough kits to support the administration of more than 550 million doses for all vaccine types. In Europe and Canada, McKesson is also partnering with the local governments in the COVID-19 vaccine drive through administration in its owned and banner pharmacies as well as distribution efforts in selected markets and countries.

McKesson continues to actively pursue deals, divestitures and acquisitions to drive growth. In fiscal 2021, with respect to biopharma services, the company brought together its RelayHealth Pharmacy, CoverMyMeds (a wholly-owned subsidiary of its Prescription Technology Solutions sub unit) and RxCrossroads businesses. These businesses, combined, are committed toward innovating and automating the ways in which biopharma connects with patients, pharmacies and providers with the primary objective of offering stronger access, affordability and better adherence outcomes.

Estimates Trend

For fiscal 2022, the Zacks Consensus Estimate for revenues is pegged at $249.52 billion, indicating an improvement of 4.7% from the year-ago period. The same for adjusted earnings per share stands at $19.13, suggesting growth of 11.6% from the prior-year reported figure.

Stocks to Consider

Some better-ranked stocks from the broader medical space are HCA Healthcare, Inc. (HCA - Free Report) , DaVita Inc. (DVA - Free Report) and Henry Schein, Inc. (HSIC - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

HCA Healthcare’s long-term earnings growth rate is expected at 12.3%.

DaVita’s long-term earnings growth rate is estimated at 14.4%.

Henry Schein’s long-term earnings growth rate is projected at 11.2%. 

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