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McKesson (MCK) Hits 52-Week High: What's Driving the Stock?

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Shares of McKesson Corporation (MCK - Free Report) scaled a new 52-week high of $522.82 on Feb 26, 2024, before closing the session slightly lower at $519.20.

Over the past year, this Zacks Rank #3 (Hold) stock has gained 46.1% compared with 14.1% growth of the industry and a 27.1% rise of the S&P 500 Composite.

Over the past five years, the company registered earnings growth of 15.4% compared with the industry’s 8% rise. The company’s long-term expected growth rate of 10.8% compares with the industry’s growth projection of 11.2%. McKesson’s earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average surprise being 9.1%.

McKesson is witnessing an upward trend in its stock price, prompted by its robust Biologics business. The optimism led by a solid third-quarter fiscal 2024 performance and its strategic deals are expected to contribute further. However, stiff competition and weaker generic pharmaceutical pricing trends persist.

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Let’s delve deeper.

Key Growth Drivers

Strength in Biologics: Investors are optimistic about McKesson’s robust Biologics business. Independent specialty pharmacy, Biologics by McKesson, has been making impressive progress lately. In December 2023, Novartis selected the pharmacy as a specialty pharmacy provider for FABHALTA (iptacopan).

The same month, the pharmacy was selected by SpringWorks Therapeutics as a limited distribution specialty pharmacy for OGSIVEO (nirogacestat).

Strategic Deals: McKesson continues to actively pursue deals, divestitures and acquisitions to drive growth, raising our optimism. In August 2023, the company extended its relationship with Genpact. The extension was aimed at bringing continued efficiency and automation capabilities to McKesson’s finance operations, utilizing automation and AI solutions.

Strong Q3 Results: McKesson’s robust third-quarter fiscal 2024 results buoy optimism. The company recorded a robust uptick in its overall top line. The revenue uptick was primarily driven by growth in the U.S. Pharmaceutical segment, resulting from increased prescription volumes, including higher volumes from specialty products, retail national account customers, and GLP-1 medications.


Weak Trends: McKesson distributes generic pharmaceuticals, which are subject to price fluctuation. The Distribution Solutions segment continues to experience weaker generic pharmaceutical pricing trends. Continued volatility, unfavorable pricing trends, reimbursement of generic drugs and significant fluctuations in the nature, frequency and magnitude of generic pharmaceutical launches could have a material adverse impact on McKesson.

Stiff Competition: Distribution Solutions faces stiff competition both in terms of price and service from various full-line, short-line and specialty wholesalers, service merchandisers, self-warehousing chains, manufacturers engaged in direct distribution, third-party logistics companies and large-payer organizations. Moreover, the company depends on fewer suppliers for its products. As a result, it is not in a position to negotiate pricing.

Key Picks

Some better-ranked stocks in the broader medical space are DaVita Inc. (DVA - Free Report) , Cardinal Health, Inc. (CAH - Free Report) and DexCom, Inc. (DXCM - Free Report) .

DaVita, sporting a Zacks Rank #1 (Strong Buy), has an estimated long-term growth rate of 12.1%. DVA’s earnings surpassed estimates in each of the trailing four quarters, with the average surprise being 35.6%. You can see the complete list of today’s Zacks #1 Rank stocks here.

DaVita’s shares have gained 50.9% compared with the industry’s 14.5% rise in the past year.

Cardinal Health, flaunting a Zacks Rank of 1 at present, has an estimated long-term growth rate of 15.9%. CAH’s earnings surpassed estimates in each of the trailing four quarters, with the average being 15.6%.

Cardinal Health has gained 42.5% compared with the industry’s 14.1% rise in the past year.

DexCom, carrying a Zacks Rank of 2 (Buy) at present, has an estimated long-term growth rate of 33.1%. DXCM’s earnings surpassed estimates in each of the trailing four quarters, with the average surprise being 32.8%.

DexCom’s shares have rallied 5.1% compared with the industry’s 10.5% rise in the past year.

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