A month has gone by since the last earnings report for McKesson (MCK Quick QuoteMCK - Free Report) . Shares have added about 3.6% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is McKesson due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

McKesson Earnings and Revenues Beat Estimates in Q1

McKesson Corporation reported first-quarter fiscal 2022 adjusted earnings per share 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 earnings per share 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.

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 earnings per share 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.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended downward during the past month.

VGM Scores

Currently, McKesson has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, McKesson has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.