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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 33.8%, compared with the industry’s growth of 31.6% in a year’s time. The S&P 500 Index has rallied 29.2% in the same time frame.
McKesson — with a market capitalization of $31.12 billion — is a health care services and information technology company. It anticipates earnings to improve 7.5% over the next five years. The company has a trailing four-quarter earnings surprise of 17.9%, on average.
Image Source: Zacks Investment Research
Let’s take a closer look at the factors that substantiate the company’s Zacks Rank #3 (Hold).
Headwind
McKesson distributes generic pharmaceuticals, which are subject to price fluctuation. 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 due to several patent expirations in the next few years and an aging population.
Per the fiscal first-quarter 2022 earnings call, the company’s U.S. and international distribution businesses are playing a key role in the pandemic response. Meanwhile, its growing partnership with the United States government's COVID-19 vaccine distribution efforts reflects operational excellence and capabilities. Through July 2021, McKesson’s US Pharmaceutical business successfully distributed above 185 million Moderna and J&J COVID-19 vaccines to administration sites across the United States. The company’s medical business has gathered enough kits to support the administration of above 785 million doses for all vaccine types.
In the quarter under review, the United States government asked McKesson to support their mission of sending millions of COVID-19 vaccines to countries in need across the globe. Again, through July, the company successfully prepared more than 65 million COVID-19 vaccines for shipment abroad. McKesson’s role in Europe and Canada also continues to grow as it partners with local governments to distribute and administer COVID-19 vaccines there as well. Through July, it distributed more than 45 million vaccines to administration sites in select markets throughout these geographies.
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
McKesson has been witnessing an upward estimate revision trend for fiscal 2022. In the past 60 days, the Zacks Consensus Estimate for its earnings has moved north by 4.8% to $20.14.
The Zacks Consensus Estimate for fiscal second-quarter 2022 revenues is pegged at $62.66 billion, suggesting growth of 3.1% from the year-ago reported number.
Image: Bigstock
Here's Why You Should Retain McKesson (MCK) Stock Right Now
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 33.8%, compared with the industry’s growth of 31.6% in a year’s time. The S&P 500 Index has rallied 29.2% in the same time frame.
McKesson — with a market capitalization of $31.12 billion — is a health care services and information technology company. It anticipates earnings to improve 7.5% over the next five years. The company has a trailing four-quarter earnings surprise of 17.9%, on average.
Image Source: Zacks Investment Research
Let’s take a closer look at the factors that substantiate the company’s Zacks Rank #3 (Hold).
Headwind
McKesson distributes generic pharmaceuticals, which are subject to price fluctuation. 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 due to several patent expirations in the next few years and an aging population.
Per the fiscal first-quarter 2022 earnings call, the company’s U.S. and international distribution businesses are playing a key role in the pandemic response. Meanwhile, its growing partnership with the United States government's COVID-19 vaccine distribution efforts reflects operational excellence and capabilities. Through July 2021, McKesson’s US Pharmaceutical business successfully distributed above 185 million Moderna and J&J COVID-19 vaccines to administration sites across the United States. The company’s medical business has gathered enough kits to support the administration of above 785 million doses for all vaccine types.
In the quarter under review, the United States government asked McKesson to support their mission of sending millions of COVID-19 vaccines to countries in need across the globe. Again, through July, the company successfully prepared more than 65 million COVID-19 vaccines for shipment abroad. McKesson’s role in Europe and Canada also continues to grow as it partners with local governments to distribute and administer COVID-19 vaccines there as well. Through July, it distributed more than 45 million vaccines to administration sites in select markets throughout these geographies.
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
McKesson has been witnessing an upward estimate revision trend for fiscal 2022. In the past 60 days, the Zacks Consensus Estimate for its earnings has moved north by 4.8% to $20.14.
The Zacks Consensus Estimate for fiscal second-quarter 2022 revenues is pegged at $62.66 billion, suggesting growth of 3.1% from the year-ago reported number.
Stocks to Consider
Some better-ranked stocks from the broader medical space are Henry Schein, Inc. (HSIC - Free Report) , Envista Holdings Corporation (NVST - Free Report) and Merit Medical Systems, Inc. (MMSI - Free Report) , each currently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Henry Schein’s long-term earnings growth rate is estimated at 13.9%.
Envista Holdings’ long-term earnings growth rate is estimated at 27.4%.
Merit Medical’s long-term earnings growth rate is projected at 13.6%.