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Here's Why You Should Retain McKesson (MCK) Stock for Now
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McKessonCorporation (MCK - Free Report) is well poised for growth, backed by strategic collaborations and strength in the Distribution Solutions segment. However, the company’s opioid-related litigation expenses pose a threat.
Shares of this Zacks Rank #3 (Hold) company have fallen 1.3% so far this year against the industry’s 7.4% growth. The S&P 500 Index has risen 7.4% in the same time frame.
McKesson, with a market capitalization of $50.68 billion, is a healthcare services and information technology company. Its earnings are anticipated to improve 10.4% over the next five years.
The company’s earnings beat estimates in two of the trailing four quarters and missed the same in the other two, the average surprise being 3.42%. Its earnings yield of 7.11% also compares favorably with the industry’s 4.73%.
Image Source: Zacks Investment Research
What’s Favoring MCK?
McKesson continues to actively pursue deals, divestitures and acquisitions to drive growth. In April 2022, the company completed the divestiture of its retail and distribution businesses in the United Kingdom to Aurelius.
During fiscal 2022, MCK completed the sale of its Austrian business to Quadrifolia management and the remaining share of its German joint venture to Walgreens Boots Alliance. It is currently progressing with the divestiture of its European business. These divestitures will allow McKesson to focus on its key growth market — the United States.
In June 2022, the company formed a joint venture with HCA Healthcare (HCA - Free Report) to create a fully integrated oncology research organization. Per the deal, McKesson and HCA will integrate their respective research units — U.S. Oncology Research (USOR) and Sarah Cannon Research Institute (SCRI).
The newly created entity, with the combined capabilities of SCRI and USOR, is expected to boost clinical research, ramp up drug development, lead to better data and analytic capabilities, and pave the way for a wider portfolio of clinical trials. The abovementioned deal was completed in October.
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. It also stands to benefit from an increased generic utilization and inflation in generics, courtesy of an aging population and several patent expirations in the next few years.
During the fiscal third quarter of 2023, McKesson’s growth was led by its strong performance across all segments, except the International segment, which was marred by unfavorable currency movement. The divestiture of the company’s Austrian business also hurt its growth.
MCK removed a major overhang during the fiscal first quarter by signing a settlement deal related to the opioid-related claims of all 50 states, as well as the District of Columbia and all eligible territories. These developments will close the long-pending litigations that have been hurting the company’s goodwill, and also reduce its legal expenses.
What’s Hurting the Stock?
McKesson’s broad settlement of opioid-related claims of states and municipalities is likely to drive the company’s expenses in the short term. The company had to pay up to approximately $7.4 billion to the Settling Governmental Entities, per the settlement deal.
Estimates Trend
For fiscal 2023, the Zacks Consensus Estimate for revenues is pegged at $275.73 billion, indicating a 4.5% increase from the previous year. The same for adjusted earnings per share (EPS) is $25.93, implying a 9.5% increase from the previous year.
The Zacks Consensus Estimate for Alcon’s EPS has risen from $2.51 to $2.56 for 2023 in the past 30 days. ALC stock has gained 2.7% so far this year. The company delivered an average earnings surprise of 12.37% in the last four quarters.
Earnings estimates for Avanos Medical have improved from $1.64 per share to $1.68 for 2023 in the past 30 days. AVNS stock has risen 13.3% so far this year. The company delivered an average earnings surprise of 11.01% in the last four quarters.
Earnings estimates for Embecta have increased from $1.90 per share to $2.33 for fiscal 2023 in the past 30 days. EMBC stock has gained 21% so far this year. The company delivered an average earnings surprise of 38.86% in the last four quarters
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Here's Why You Should Retain McKesson (MCK) Stock for Now
McKessonCorporation (MCK - Free Report) is well poised for growth, backed by strategic collaborations and strength in the Distribution Solutions segment. However, the company’s opioid-related litigation expenses pose a threat.
Shares of this Zacks Rank #3 (Hold) company have fallen 1.3% so far this year against the industry’s 7.4% growth. The S&P 500 Index has risen 7.4% in the same time frame.
McKesson, with a market capitalization of $50.68 billion, is a healthcare services and information technology company. Its earnings are anticipated to improve 10.4% over the next five years.
The company’s earnings beat estimates in two of the trailing four quarters and missed the same in the other two, the average surprise being 3.42%. Its earnings yield of 7.11% also compares favorably with the industry’s 4.73%.
Image Source: Zacks Investment Research
What’s Favoring MCK?
McKesson continues to actively pursue deals, divestitures and acquisitions to drive growth. In April 2022, the company completed the divestiture of its retail and distribution businesses in the United Kingdom to Aurelius.
During fiscal 2022, MCK completed the sale of its Austrian business to Quadrifolia management and the remaining share of its German joint venture to Walgreens Boots Alliance. It is currently progressing with the divestiture of its European business. These divestitures will allow McKesson to focus on its key growth market — the United States.
In June 2022, the company formed a joint venture with HCA Healthcare (HCA - Free Report) to create a fully integrated oncology research organization. Per the deal, McKesson and HCA will integrate their respective research units — U.S. Oncology Research (USOR) and Sarah Cannon Research Institute (SCRI).
The newly created entity, with the combined capabilities of SCRI and USOR, is expected to boost clinical research, ramp up drug development, lead to better data and analytic capabilities, and pave the way for a wider portfolio of clinical trials. The abovementioned deal was completed in October.
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. It also stands to benefit from an increased generic utilization and inflation in generics, courtesy of an aging population and several patent expirations in the next few years.
During the fiscal third quarter of 2023, McKesson’s growth was led by its strong performance across all segments, except the International segment, which was marred by unfavorable currency movement. The divestiture of the company’s Austrian business also hurt its growth.
MCK removed a major overhang during the fiscal first quarter by signing a settlement deal related to the opioid-related claims of all 50 states, as well as the District of Columbia and all eligible territories. These developments will close the long-pending litigations that have been hurting the company’s goodwill, and also reduce its legal expenses.
What’s Hurting the Stock?
McKesson’s broad settlement of opioid-related claims of states and municipalities is likely to drive the company’s expenses in the short term. The company had to pay up to approximately $7.4 billion to the Settling Governmental Entities, per the settlement deal.
Estimates Trend
For fiscal 2023, the Zacks Consensus Estimate for revenues is pegged at $275.73 billion, indicating a 4.5% increase from the previous year. The same for adjusted earnings per share (EPS) is $25.93, implying a 9.5% increase from the previous year.
McKesson Corporation Price
McKesson Corporation price | McKesson Corporation Quote
Stocks to Consider
Some better-ranked stocks from the broader medical space are Alcon (ALC - Free Report) , Avanos Medical (AVNS - Free Report) and Embecta Corp. (EMBC - Free Report) . Embecta sports a Zacks Rank #1 (Strong Buy), whereas both Alcon and Avanos carry a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Alcon’s EPS has risen from $2.51 to $2.56 for 2023 in the past 30 days. ALC stock has gained 2.7% so far this year. The company delivered an average earnings surprise of 12.37% in the last four quarters.
Earnings estimates for Avanos Medical have improved from $1.64 per share to $1.68 for 2023 in the past 30 days. AVNS stock has risen 13.3% so far this year. The company delivered an average earnings surprise of 11.01% in the last four quarters.
Earnings estimates for Embecta have increased from $1.90 per share to $2.33 for fiscal 2023 in the past 30 days. EMBC stock has gained 21% so far this year. The company delivered an average earnings surprise of 38.86% in the last four quarters