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McKesson (MCK) Earnings and Revenues Beat Estimates in Q1
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McKesson Corporation (MCK - Free Report) reported first-quarter fiscal 2022 adjusted earnings per share (EPS) of $5.56, which beat the Zacks Consensus Estimate of $4.09 per share by 35.9%. The bottom line improved 101% on a year-over-year basis.
GAAP EPS in the quarter was $3.09, up 14% from the year-ago quarter.
Revenue Details
Revenues of $62.67 billion surpassed the Zacks Consensus Estimate by 5.2%. The top line increased 13% year over year.
Q1 Segmental Analysis
Per McKesson’s segment realignment effective in the quarter under review, the reporting is as follows:
Revenues at the U.S. Pharmaceutical and Specialty Solutions segment were $50.02 billion, up 12% year over year. The metric improved 12% at constant currency (cc). Per management, the upside was primarily driven by market growth and increase in volumes from retail national account customers. However, branded to generic conversions partially offset the upside.
The U.S. Pharmaceutical and Specialty Solutions segment reported adjusted operating profit of $682 million, up 16% from the prior-year quarter.
McKesson Corporation Price, Consensus and EPS Surprise
At the International segment, revenues amounted to $9.25 billion, up 8.1% year over year. The metric, however, fell 3% at cc due to the contribution of McKesson’s German wholesale business to a joint venture with Walgreens Boots Alliance. Recovery in volume in the pharmaceutical distribution and retail pharmacy businesses partially offset the downside.
Adjusted operating profit at the segment was $151 million, up 107% from the year-ago quarter.
Revenues at the Medical-Surgical Solutions segment totaled $2.53 billion, up 40.4% year over year. Higher demand for COVID-19 tests along with improvement in primary care patient visits contributed to the upside.
The Medical-Surgical segment had adjusted operating profit of $257 million, which soared 107% from the year-ago quarter.
Revenues at the Prescription Technology Solutions segment totaled $881 million, up 34.3% year over year. Increase in volumes of technology and service offerings to lend support to biopharma customers and recovery of prescription volumes led to the improvement.
Adjusted operating profit was $139 million at the Prescription Technology Solutions segment, up 62% from the prior-year quarter.
Margins
Gross profit in the reported quarter was $3.03 billion, up 12.3% on a year-over-year basis. Meanwhile, gross margin accounted for 4.8% of net revenues, remaining flat on a year-over-year basis.
The company reported operating income of $568 million, down 16.2% from the year-ago quarter. Operating margin accounted for 0.9% of net revenues, down 30 basis points (bps) from the prior-year quarter.
Financial Update
In the quarter under review, cash and cash equivalents were $2.42 billion, compared with $6.28 billion in the previous quarter.
Net cash used in operating activities in the fiscal first quarter amounted to $1.62 billion wider than net cash used of $1.06 billion in the year-ago period.
Fiscal 2022 Guidance Raised
Backed by a robust first-quarter performance and higher contribution from the U.S. government’s COVID-19 vaccine distribution and kitting programs, McKesson has raised its fiscal 2022 earnings outlook.
For fiscal 2022, the company now projects adjusted EPS to be $19.80-$20.40 (up from the prior guided range of $18.85-$19.45), reflecting 15-18.5% growth on a year-over-year basis. The Zacks Consensus Estimate for the same is pegged at $19.23.
The abovementioned guidance assumes 80 cents to $1 associated with the U.S. government’s COVID-19 vaccine distribution and kitting programs.
Summing Up
McKesson exited the fiscal first quarter on a strong note, wherein both earnings and revenues beat the Zacks Consensus Estimate. Strong fiscal first-quarter show by all of the four segments remains a positive. Raised earnings outlook for fiscal 2022 instills optimism.
The company played a key role in the COVID-19 response efforts in the United States and abroad, through the distribution of COVID-19 vaccines, ancillary supply kits and COVID-19 tests.
Contraction in operating margin remains a woe. Price fluctuation of generic pharmaceuticals and stiff competition in the MedTech space are other headwinds.
Zacks Rank
Currently, McKesson carries a Zacks Rank #4 (Sell).
Earnings of Other MedTech Majors at a Glance
Some better-ranked stocks in the broader medical space that have already announced their quarterly results are Encompass Health Corporation (EHC - Free Report) , West Pharmaceutical Services, Inc. (WST - Free Report) and Hill-Rom Holdings, Inc. . While Encompass Health sports a Zacks Rank #1 (Strong Buy), both West Pharmaceutical and Hill-Rom carry a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Encompass Health reported second-quarter 2021 adjusted EPS of $1.17, which beat the Zacks Consensus Estimate by 15.8%. Second-quarter revenues of $1.3 billion outpaced the consensus mark by 1.5%.
West Pharmaceutical reported second-quarter 2021 adjusted EPS of $2.46, which surpassed the Zacks Consensus Estimate by 41.4%. Second-quarter revenues of $723.6 million outpaced the Zacks Consensus Estimate by 8.7%.
Hill-Rom reported third-quarter fiscal 2021 adjusted EPS of $1.38, which beat the Zacks Consensus Estimate by 2.9%. Fiscal third-quarter revenues of $717.7 million outpaced the consensus mark by 1.6%.
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McKesson (MCK) Earnings and Revenues Beat Estimates in Q1
McKesson Corporation (MCK - Free Report) reported first-quarter fiscal 2022 adjusted earnings per share (EPS) of $5.56, which beat the Zacks Consensus Estimate of $4.09 per share by 35.9%. The bottom line improved 101% on a year-over-year basis.
GAAP EPS in the quarter was $3.09, up 14% from the year-ago quarter.
Revenue Details
Revenues of $62.67 billion surpassed the Zacks Consensus Estimate by 5.2%. The top line increased 13% year over year.
Q1 Segmental Analysis
Per McKesson’s segment realignment effective in the quarter under review, the reporting is as follows:
Revenues at the U.S. Pharmaceutical and Specialty Solutions segment were $50.02 billion, up 12% year over year. The metric improved 12% at constant currency (cc). Per management, the upside was primarily driven by market growth and increase in volumes from retail national account customers. However, branded to generic conversions partially offset the upside.
The U.S. Pharmaceutical and Specialty Solutions segment reported adjusted operating profit of $682 million, up 16% from the prior-year quarter.
McKesson Corporation Price, Consensus and EPS Surprise
McKesson Corporation price-consensus-eps-surprise-chart | McKesson Corporation Quote
At the International segment, revenues amounted to $9.25 billion, up 8.1% year over year. The metric, however, fell 3% at cc due to the contribution of McKesson’s German wholesale business to a joint venture with Walgreens Boots Alliance. Recovery in volume in the pharmaceutical distribution and retail pharmacy businesses partially offset the downside.
Adjusted operating profit at the segment was $151 million, up 107% from the year-ago quarter.
Revenues at the Medical-Surgical Solutions segment totaled $2.53 billion, up 40.4% year over year. Higher demand for COVID-19 tests along with improvement in primary care patient visits contributed to the upside.
The Medical-Surgical segment had adjusted operating profit of $257 million, which soared 107% from the year-ago quarter.
Revenues at the Prescription Technology Solutions segment totaled $881 million, up 34.3% year over year. Increase in volumes of technology and service offerings to lend support to biopharma customers and recovery of prescription volumes led to the improvement.
Adjusted operating profit was $139 million at the Prescription Technology Solutions segment, up 62% from the prior-year quarter.
Margins
Gross profit in the reported quarter was $3.03 billion, up 12.3% on a year-over-year basis. Meanwhile, gross margin accounted for 4.8% of net revenues, remaining flat on a year-over-year basis.
The company reported operating income of $568 million, down 16.2% from the year-ago quarter. Operating margin accounted for 0.9% of net revenues, down 30 basis points (bps) from the prior-year quarter.
Financial Update
In the quarter under review, cash and cash equivalents were $2.42 billion, compared with $6.28 billion in the previous quarter.
Net cash used in operating activities in the fiscal first quarter amounted to $1.62 billion wider than net cash used of $1.06 billion in the year-ago period.
Fiscal 2022 Guidance Raised
Backed by a robust first-quarter performance and higher contribution from the U.S. government’s COVID-19 vaccine distribution and kitting programs, McKesson has raised its fiscal 2022 earnings outlook.
For fiscal 2022, the company now projects adjusted EPS to be $19.80-$20.40 (up from the prior guided range of $18.85-$19.45), reflecting 15-18.5% growth on a year-over-year basis. The Zacks Consensus Estimate for the same is pegged at $19.23.
The abovementioned guidance assumes 80 cents to $1 associated with the U.S. government’s COVID-19 vaccine distribution and kitting programs.
Summing Up
McKesson exited the fiscal first quarter on a strong note, wherein both earnings and revenues beat the Zacks Consensus Estimate. Strong fiscal first-quarter show by all of the four segments remains a positive. Raised earnings outlook for fiscal 2022 instills optimism.
The company played a key role in the COVID-19 response efforts in the United States and abroad, through the distribution of COVID-19 vaccines, ancillary supply kits and COVID-19 tests.
Contraction in operating margin remains a woe. Price fluctuation of generic pharmaceuticals and stiff competition in the MedTech space are other headwinds.
Zacks Rank
Currently, McKesson carries a Zacks Rank #4 (Sell).
Earnings of Other MedTech Majors at a Glance
Some better-ranked stocks in the broader medical space that have already announced their quarterly results are Encompass Health Corporation (EHC - Free Report) , West Pharmaceutical Services, Inc. (WST - Free Report) and Hill-Rom Holdings, Inc. . While Encompass Health sports a Zacks Rank #1 (Strong Buy), both West Pharmaceutical and Hill-Rom carry a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Encompass Health reported second-quarter 2021 adjusted EPS of $1.17, which beat the Zacks Consensus Estimate by 15.8%. Second-quarter revenues of $1.3 billion outpaced the consensus mark by 1.5%.
West Pharmaceutical reported second-quarter 2021 adjusted EPS of $2.46, which surpassed the Zacks Consensus Estimate by 41.4%. Second-quarter revenues of $723.6 million outpaced the Zacks Consensus Estimate by 8.7%.
Hill-Rom reported third-quarter fiscal 2021 adjusted EPS of $1.38, which beat the Zacks Consensus Estimate by 2.9%. Fiscal third-quarter revenues of $717.7 million outpaced the consensus mark by 1.6%.