A month has gone by since the last earnings report for McKesson (MCK Quick QuoteMCK - Free Report) . Shares have added about 5.1% in that time frame, underperforming 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 its most recent earnings report in order to get a better handle on the important catalysts.

McKesson Beats on Q2 Earnings, Raises '23 EPS View

McKesson Corporation reported second-quarter fiscal 2024 adjusted earnings per share (EPS) of $6.23, which beat the Zacks Consensus Estimate of $6.11 by 2%. The bottom line also improved 3% on a year-over-year basis.

GAAP EPS was $4.92, down 23.8% from the year-ago quarter’s level. The significant decline was due to the provision of bad debts worth $210 million for uncollected trade accounts receivable related to the bankruptcy of Rite Aid Corporation.

Revenue Details

Revenues of $77.22 billion beat the Zacks Consensus Estimate by 1.8%. The top line also increased 10% 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.

Q2 Segmental Analysis

Revenues at the U.S. Pharmaceutical segment totaled $69.8 billion, up 16% 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 $815 million, up 8% 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 15% year over year, excluding the impact of the abovementioned vaccine’s distribution.

At the International segment, revenues amounted to $3.5 billion, down 43% year over year. This was due to divestitures of McKesson’s European businesses.

Adjusted operating profit at the segment totaled $93 million, down 32% from the year-ago quarter’s figure.

Revenues at the Medical-Surgical Solutions segment totaled $2.8 billion, flat year over year. Sales were primarily hurt by lower COVID-19-related sales.

The Medical-Surgical segment reported an adjusted operating profit of $254 million, down 17% year over year. Excluding the impact of COVID-related items, the adjusted metric was up 5%.

Revenues at the Prescription Technology Solutions segment totaled $1.1 billion, up 12% 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 $209 million at the segment, up 48% from the prior-year quarter’s level.

Margins

Gross profit in the reported quarter was $3.07 billion, down 1% on a year-over-year basis. The figure accounted for 4% of net revenues.

The company reported an operating income of $977 million, down 25% from the year-ago quarter’s figure. Operating margin accounted for 1.3% of net revenues.

Financial Update

Cash and cash equivalents totaled $2.52 billion compared with $2.64 billion in the previous quarter.

Cumulative net cash used in operating activities amounted to $87 million against net cash provided by operating activities of $166 million 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 $26.80-$27.40, up from the previous guidance of $26.55-$27.35. The Zacks Consensus Estimate for the same is pegged at $27.21. The company now expects revenues to grow 8-12% versus 7-12% as estimated previously.

How Have Estimates Been Moving Since Then?

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

The consensus estimate has shifted 5.33% due to these changes.

VGM Scores

Currently, McKesson has a nice Growth Score of B, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top 20% 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 trending upward for the stock, and the magnitude of these revisions looks promising. Notably, McKesson has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

McKesson belongs to the Zacks Medical - Dental Supplies industry. Another stock from the same industry, Labcorp (LH Quick QuoteLH - Free Report) , has gained 5.7% over the past month. More than a month has passed since the company reported results for the quarter ended September 2023.

Labcorp reported revenues of $3.06 billion in the last reported quarter, representing a year-over-year change of -15.2%. EPS of $3.38 for the same period compares with $4.68 a year ago.

Labcorp is expected to post earnings of $3.32 per share for the current quarter, representing a year-over-year change of -19.8%. Over the last 30 days, the Zacks Consensus Estimate has changed -0.6%.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Labcorp. Also, the stock has a VGM Score of D.