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McKesson (MCK) Q1 Earnings Beat Estimates, U.S. Sales Strong
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McKesson Corporation (MCK - Free Report) reported fiscal first-quarter 2024 adjusted earnings per share (EPS) of $7.19, which significantly beat the Zacks Consensus Estimate of $5.85 by 24.3%. The bottom line improved 24.7% on a year-over-year basis.
GAAP EPS was $7.02, up 33.7% from the year-ago quarter’s level.
Revenue Details
Revenues of $74.48 billion beat the Zacks Consensus Estimate by 6.5%. The top line also increased 10.9% year over year, reflecting strong growth in the United States. This was partially offset by lower international sales due to divestitures of its European businesses.
Q1 Segmental Analysis
Revenues at the U.S. Pharmaceutical segment totaled $67.16 billion, up 17.9% year over year. Per management, the upside was primarily driven by higher volume of specialty products, including an increase in volume from retail national account customers. However, branded-to-generic conversions partially offset the upside.
The U.S. Pharmaceutical and Specialty Solutions segment reported an adjusted operating profit of $771 million, up 8.4% from the prior-year quarter’s level. This was due to growth in the distribution of specialty products to providers and health systems, and increased contributions from our generics program, partially mitigated by lower demand for COVID-19 vaccine distribution. The adjusted metric for the segment was up 14%, excluding the impact of the abovementioned vaccine’s distribution.
At the International segment, revenues amounted to $3.47 billion, down 34.8% year over year. This was due to divestitures of McKesson’s European businesses.
Adjusted operating profit at the segment totaled $90 million, down 45.6% from the year-ago quarter’s figure.
Revenues at the Medical-Surgical Solutions segment totaled $2.61 billion, up 0.7% year over year. Sales were driven by growth in the extended and primary care, and specialty pharmaceuticals. However, this was partially offset by lower COVID-19-related sales.
The Medical-Surgical segment reported an adjusted operating profit of $235 million, down 12.3% year over year. Excluding the impact of COVID-related items, the adjusted metric was up 7%.
Revenues at the Prescription Technology Solutions segment totaled $1.24 billion, up 16.7% from that recorded a year ago. The improvement can be attributed to higher technology services revenues and an increase in prescriptions from third-party logistics.
Adjusted operating profit amounted to $223 million at the Prescription Technology Solutions segment, up 35.2% from the prior-year quarter’s level.
Margins
Gross profit in the reported quarter was $3.07 billion, flat on a year-over-year basis. The figure accounted for 4.1% of net revenues.
The company reported an operating income of $1.1 billion, up 6.2% from the year-ago quarter’s figure. Operating margin accounted for 1.5% of net revenues.
Financial Update
Cash and cash equivalents totaled $2.64 billion compared with $4.68 billion in the previous quarter.
Cumulative net cash used in operating activities amounted to $1.05 billion, up from $941 million recorded in the year-ago period.
Fiscal 2024 Guidance
McKesson raised its adjusted earnings guidance for fiscal 2024. It now projects adjusted EPS in the range of $26.55-$27.35, up from the previous guidance of $26.10-$26.90. The Zacks Consensus Estimate for the same is pegged at $26.51.
McKesson Corporation Price, Consensus and EPS Surprise
McKesson exited the fiscal first quarter of 2024 on a strong note, wherein both earnings and revenues beat their respective estimates. The outperformance reflects strong demand for its pharmaceuticals and prescription technology solutions.
However, lower COVID-19-related sales and divesture of European businesses hurt top and bottom-line growth for Medical-Surgical Solutions and International segments, respectively.
The company expects the impact of COVID-related sales and divesture to be lower in fiscal 2024. A strong earnings outlook for the year raises optimism.
However, price fluctuation of generic pharmaceuticals and stiff competition in the MedTech space remain as headwinds.
Zacks Rank and Other Key Picks
McKesson currently carries a Zacks Rank #2 (Buy).
Some other top-ranked stocks in the broader medical space that have announced quarterly results are Abbott Laboratories (ABT - Free Report) , Elevance Health, Inc. (ELV - Free Report) and Intuitive Surgical, Inc. (ISRG - Free Report) .
Revenues of $9.98 billion outpaced the consensus mark by 2.9%.
Abbott has a long-term estimated growth rate of 5.1%. ABT’s earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 12.4%.
Elevance Health reported second-quarter 2023 adjusted EPS of $9.04, which beat the Zacks Consensus Estimate by 2.5%. Revenues of $43.38 billion surpassed the Zacks Consensus Estimate by 4.5%. The company currently carries a Zacks Rank #2.
ELV has a long-term estimated growth rate of 12.1%. Its earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 2.8%.
Intuitive Surgical reported second-quarter 2023 adjusted EPS of $1.42, which beat the Zacks Consensus Estimate by 7.6%. Revenues of $1.76 billion surpassed the consensus mark by 1.4%. The company currently carries a Zacks Rank #2.
ISRG has a long-term estimated growth rate of 14.5%. Its earnings surpassed estimates in three of the trailing four quarters and missed once, delivering an average surprise of 4.2%.
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McKesson (MCK) Q1 Earnings Beat Estimates, U.S. Sales Strong
McKesson Corporation (MCK - Free Report) reported fiscal first-quarter 2024 adjusted earnings per share (EPS) of $7.19, which significantly beat the Zacks Consensus Estimate of $5.85 by 24.3%. The bottom line improved 24.7% on a year-over-year basis.
GAAP EPS was $7.02, up 33.7% from the year-ago quarter’s level.
Revenue Details
Revenues of $74.48 billion beat the Zacks Consensus Estimate by 6.5%. The top line also increased 10.9% year over year, reflecting strong growth in the United States. This was partially offset by lower international sales due to divestitures of its European businesses.
Q1 Segmental Analysis
Revenues at the U.S. Pharmaceutical segment totaled $67.16 billion, up 17.9% year over year. Per management, the upside was primarily driven by higher volume of specialty products, including an increase in volume from retail national account customers. However, branded-to-generic conversions partially offset the upside.
The U.S. Pharmaceutical and Specialty Solutions segment reported an adjusted operating profit of $771 million, up 8.4% from the prior-year quarter’s level. This was due to growth in the distribution of specialty products to providers and health systems, and increased contributions from our generics program, partially mitigated by lower demand for COVID-19 vaccine distribution. The adjusted metric for the segment was up 14%, excluding the impact of the abovementioned vaccine’s distribution.
At the International segment, revenues amounted to $3.47 billion, down 34.8% year over year. This was due to divestitures of McKesson’s European businesses.
Adjusted operating profit at the segment totaled $90 million, down 45.6% from the year-ago quarter’s figure.
Revenues at the Medical-Surgical Solutions segment totaled $2.61 billion, up 0.7% year over year. Sales were driven by growth in the extended and primary care, and specialty pharmaceuticals. However, this was partially offset by lower COVID-19-related sales.
The Medical-Surgical segment reported an adjusted operating profit of $235 million, down 12.3% year over year. Excluding the impact of COVID-related items, the adjusted metric was up 7%.
Revenues at the Prescription Technology Solutions segment totaled $1.24 billion, up 16.7% from that recorded a year ago. The improvement can be attributed to higher technology services revenues and an increase in prescriptions from third-party logistics.
Adjusted operating profit amounted to $223 million at the Prescription Technology Solutions segment, up 35.2% from the prior-year quarter’s level.
Margins
Gross profit in the reported quarter was $3.07 billion, flat on a year-over-year basis. The figure accounted for 4.1% of net revenues.
The company reported an operating income of $1.1 billion, up 6.2% from the year-ago quarter’s figure. Operating margin accounted for 1.5% of net revenues.
Financial Update
Cash and cash equivalents totaled $2.64 billion compared with $4.68 billion in the previous quarter.
Cumulative net cash used in operating activities amounted to $1.05 billion, up from $941 million recorded in the year-ago period.
Fiscal 2024 Guidance
McKesson raised its adjusted earnings guidance for fiscal 2024. It now projects adjusted EPS in the range of $26.55-$27.35, up from the previous guidance of $26.10-$26.90. The Zacks Consensus Estimate for the same is pegged at $26.51.
McKesson Corporation Price, Consensus and EPS Surprise
McKesson Corporation price-consensus-eps-surprise-chart | McKesson Corporation Quote
Summing Up
McKesson exited the fiscal first quarter of 2024 on a strong note, wherein both earnings and revenues beat their respective estimates. The outperformance reflects strong demand for its pharmaceuticals and prescription technology solutions.
However, lower COVID-19-related sales and divesture of European businesses hurt top and bottom-line growth for Medical-Surgical Solutions and International segments, respectively.
The company expects the impact of COVID-related sales and divesture to be lower in fiscal 2024. A strong earnings outlook for the year raises optimism.
However, price fluctuation of generic pharmaceuticals and stiff competition in the MedTech space remain as headwinds.
Zacks Rank and Other Key Picks
McKesson currently carries a Zacks Rank #2 (Buy).
Some other top-ranked stocks in the broader medical space that have announced quarterly results are Abbott Laboratories (ABT - Free Report) , Elevance Health, Inc. (ELV - Free Report) and Intuitive Surgical, Inc. (ISRG - Free Report) .
Abbott, carrying a Zacks Rank #2 at present, reported second-quarter 2023 adjusted EPS of $1.08, which beat the Zacks Consensus Estimate by 3.8%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Revenues of $9.98 billion outpaced the consensus mark by 2.9%.
Abbott has a long-term estimated growth rate of 5.1%. ABT’s earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 12.4%.
Elevance Health reported second-quarter 2023 adjusted EPS of $9.04, which beat the Zacks Consensus Estimate by 2.5%. Revenues of $43.38 billion surpassed the Zacks Consensus Estimate by 4.5%. The company currently carries a Zacks Rank #2.
ELV has a long-term estimated growth rate of 12.1%. Its earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 2.8%.
Intuitive Surgical reported second-quarter 2023 adjusted EPS of $1.42, which beat the Zacks Consensus Estimate by 7.6%. Revenues of $1.76 billion surpassed the consensus mark by 1.4%. The company currently carries a Zacks Rank #2.
ISRG has a long-term estimated growth rate of 14.5%. Its earnings surpassed estimates in three of the trailing four quarters and missed once, delivering an average surprise of 4.2%.