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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 $539.99 on Mar 27, 2024, before closing the session marginally lower at $539.26.
Over the past year, this Zacks Rank #3 (Hold) stock has gained 50.9% compared with the 15.9% growth of the industry and the 30.6% 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 12.8% rise. The company’s long-term expected growth rate of 11.9% compares with the industry’s growth projection of 11.6%. 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 improving demand for healthcare are expected to contribute further. However, stiff competition and weaker generic pharmaceutical pricing trends persist.
Image Source: Zacks Investment Research
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).
Improving Demand for Healthcare: Following significant market disruption in the past three years due to COVID-19, the medical sector is witnessing improving demand across several verticals, especially surgeries. McKesson is also benefiting from a recovery in demand driving volumes, raising our optimism. Moreover, the improving prices of products are boosting sales. Rising demand for extended and primary care is expected to drive the top line for Medical-Surgical business in fiscal 2024.
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.
Downsides
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 Cencora, Inc. (COR - Free Report) .
DaVita, sporting a Zacks Rank #1 (Strong Buy) at present, 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 74.4% compared with the industry’s 23.6% rise in the past year.
Cardinal Health, carrying a Zacks Rank of 2 (Buy) at present, has an estimated long-term growth rate of 14.2%. CAH’s earnings surpassed estimates in each of the trailing four quarters, with the average being 15.6%.
Cardinal Health has gained 50.9% compared with the industry’s 15.9% rise in the past year.
Cencora, carrying a Zacks Rank of 2 at present, has an estimated long-term growth rate of 9.8%. COR’s earnings surpassed estimates in each of the trailing four quarters, with the average surprise being 6.7%.
Cencora’s shares have rallied 53.9% compared with the industry’s 7.5% rise in the past year.
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McKesson (MCK) Hits 52-Week High: What's Driving the Stock?
Shares of McKesson Corporation (MCK - Free Report) scaled a new 52-week high of $539.99 on Mar 27, 2024, before closing the session marginally lower at $539.26.
Over the past year, this Zacks Rank #3 (Hold) stock has gained 50.9% compared with the 15.9% growth of the industry and the 30.6% 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 12.8% rise. The company’s long-term expected growth rate of 11.9% compares with the industry’s growth projection of 11.6%. 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 improving demand for healthcare are expected to contribute further. However, stiff competition and weaker generic pharmaceutical pricing trends persist.
Image Source: Zacks Investment Research
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).
Improving Demand for Healthcare: Following significant market disruption in the past three years due to COVID-19, the medical sector is witnessing improving demand across several verticals, especially surgeries. McKesson is also benefiting from a recovery in demand driving volumes, raising our optimism. Moreover, the improving prices of products are boosting sales. Rising demand for extended and primary care is expected to drive the top line for Medical-Surgical business in fiscal 2024.
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.
Downsides
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 Cencora, Inc. (COR - Free Report) .
DaVita, sporting a Zacks Rank #1 (Strong Buy) at present, 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 74.4% compared with the industry’s 23.6% rise in the past year.
Cardinal Health, carrying a Zacks Rank of 2 (Buy) at present, has an estimated long-term growth rate of 14.2%. CAH’s earnings surpassed estimates in each of the trailing four quarters, with the average being 15.6%.
Cardinal Health has gained 50.9% compared with the industry’s 15.9% rise in the past year.
Cencora, carrying a Zacks Rank of 2 at present, has an estimated long-term growth rate of 9.8%. COR’s earnings surpassed estimates in each of the trailing four quarters, with the average surprise being 6.7%.
Cencora’s shares have rallied 53.9% compared with the industry’s 7.5% rise in the past year.