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MCK Stock Gains as Q2 Earnings & Sales Top Estimates, '25 EPS View Up
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McKesson Corporation (MCK - Free Report) reported second-quarter fiscal 2025 adjusted earnings per share (EPS) of $7.07, which beat the Zacks Consensus Estimate of $6.89 by 2.6%. The bottom line also improved 13.5% on a year-over-year basis.
GAAP EPS was $1.87, down 62% from the year-ago quarter’s level.
Revenue Details
Revenues of $93.65 billion beat the Zacks Consensus Estimate by 4.7%. The top line increased 21.3% year over year, primarily driven by the upside from continued momentum in the Pharmaceutical segment, especially for specialty products and GLP-1 medications. MCK also recorded increased prescription volumes during the quarter.
Higher contributions from the Prescription Technology Solutions and Medical-Surgical Solutions segments also aided the top line. International markets also recorded promising growth during the quarter.
Shares of MCK were up 4.7% during after-hours trading on Nov. 6, likely due to strong top and bottom-line performances. The company’s shares have risen 18.8% year to date compared with the industry’s 2.9% growth. The S&P 500 Index has gained 24.7% in the same time frame.
Image Source: Zacks Investment Research
Q2 Segmental Analysis
Revenues in the U.S. Pharmaceutical segment totaled $85.7 billion, up 23% year over year. Per management, the upside was primarily driven by increased prescription volumes from specialty products, retail national account customers and GLP-1 medications.
The U.S. Pharmaceutical and Specialty Solutions segment reported an adjusted operating profit of $902 million, up 11% from the prior-year quarter’s level. This was due to an increase in the distribution of specialty products to providers and health systems.
In the International segment, revenues amounted to $3.7 billion, up 7% year over year. This was due to higher pharmaceutical distribution volumes in the Canadian business.
Adjusted operating profit at the segment totaled $100 million, up 12% from the year-ago reported figure.
Revenues in the Medical-Surgical Solutions segment totaled $2.9 billion, up 4% year over year. Sales were primarily driven by higher volumes of specialty pharmaceuticals, including vaccines in the primary care channel.
The Medical-Surgical segment reported an adjusted operating profit of $243 million, down 4% year over year. This decline was due to lower volumes, customer mix, and product demand shifts across the primary care sites, partially offset by growth in the extended care business.
Revenues in the Prescription Technology Solutions segment totaled $1.3 billion, up 11% year over year. This uptick was due to growth in the technology services business and higher contributions from the third-party logistics businesses.
The segment reported an adjusted operating profit of $218 million, up 4% year over year, driven by growth in affordability and access solutions, partially offset by investments to support future growth.
Margins
Gross profit in the reported quarter was $3.25 billion, up 5.8% on a year-over-year basis. The figure represented 3.5% of net revenues, down nearly 50 basis points (bps) year over year.
The company reported an operating income of $578 million, down 39.2% from the year-ago quarter’s figure, primarily due to higher cost of sales. Operating margin was 0.6%, down almost 60 bps year over year.
Financial Update
Cash and cash equivalents totaled $2.51 billion compared with $2.3 billion a year ago.
Cumulative net cash provided by operating activities amounted to $720 million against cumulative net cash used in operating activities of $87 million in the year-earlier period.
Fiscal 2025 Guidance
McKesson raised its adjusted EPS guidance for fiscal 2025. It now expects adjusted EPS to be in the range of $32.40-$33.00 (previously $31.75-$32.55), which represents growth of 18-20% from the prior-year level. The Zacks Consensus Estimate for the same is pegged at $31.92. Revenues are expected to grow 15-17% from the prior-year figure.
McKesson Corporation Price, Consensus and EPS Surprise
McKesson exited the second quarter of fiscal 2025 on a strong note, with earnings and revenues beating estimates. Revenues reflect strong momentum in the U.S. pharmaceutical segment, driven by robust demand across its offerings. The company added a large distribution customer to its portfolio during the fiscal first quarter that strongly benefited the segment in the reported quarter.
Moreover, an improved Medical-Surgical business amid recovery in the primary care channel looks promising. The company has started initiatives to boost its operational efficiency and optimize cost, however, it will likely take a while to get reflected in the company’s performance.
Meanwhile, the decline in operating margin, reflecting higher costs and expenses, is likely to continue in the next quarter.
Zacks Rank and Stocks to Consider
McKesson currently carries a Zacks Rank #3 (Hold).
ANGO’s earnings surpassed estimates in three of the trailing four quarters and missed once, delivering an average surprise of 31.71%.
AngioDynamics’ shares have lost 19.2% year to date against the industry’s 6.1% growth.
Masimo, sporting a Zacks Rank of 1 at present, has an estimated growth rate of 10.4% for 2025. MASI’s earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 17.10%.
Masimo’s shares have risen 5.3% year to date compared with the industry’s 5.1% growth.
Globus Medical, carrying a Zacks Rank #2 (Buy) at present, has an estimated long-term growth rate of 12.7%. GMED’s earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 12.1%. Its shares have risen 38.7% year to date compared with the industry’s 6.1% growth.
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MCK Stock Gains as Q2 Earnings & Sales Top Estimates, '25 EPS View Up
McKesson Corporation (MCK - Free Report) reported second-quarter fiscal 2025 adjusted earnings per share (EPS) of $7.07, which beat the Zacks Consensus Estimate of $6.89 by 2.6%. The bottom line also improved 13.5% on a year-over-year basis.
GAAP EPS was $1.87, down 62% from the year-ago quarter’s level.
Revenue Details
Revenues of $93.65 billion beat the Zacks Consensus Estimate by 4.7%. The top line increased 21.3% year over year, primarily driven by the upside from continued momentum in the Pharmaceutical segment, especially for specialty products and GLP-1 medications. MCK also recorded increased prescription volumes during the quarter.
Higher contributions from the Prescription Technology Solutions and Medical-Surgical Solutions segments also aided the top line. International markets also recorded promising growth during the quarter.
Shares of MCK were up 4.7% during after-hours trading on Nov. 6, likely due to strong top and bottom-line performances. The company’s shares have risen 18.8% year to date compared with the industry’s 2.9% growth. The S&P 500 Index has gained 24.7% in the same time frame.
Image Source: Zacks Investment Research
Q2 Segmental Analysis
Revenues in the U.S. Pharmaceutical segment totaled $85.7 billion, up 23% year over year. Per management, the upside was primarily driven by increased prescription volumes from specialty products, retail national account customers and GLP-1 medications.
The U.S. Pharmaceutical and Specialty Solutions segment reported an adjusted operating profit of $902 million, up 11% from the prior-year quarter’s level. This was due to an increase in the distribution of specialty products to providers and health systems.
In the International segment, revenues amounted to $3.7 billion, up 7% year over year. This was due to higher pharmaceutical distribution volumes in the Canadian business.
Adjusted operating profit at the segment totaled $100 million, up 12% from the year-ago reported figure.
Revenues in the Medical-Surgical Solutions segment totaled $2.9 billion, up 4% year over year. Sales were primarily driven by higher volumes of specialty pharmaceuticals, including vaccines in the primary care channel.
The Medical-Surgical segment reported an adjusted operating profit of $243 million, down 4% year over year. This decline was due to lower volumes, customer mix, and product demand shifts across the primary care sites, partially offset by growth in the extended care business.
Revenues in the Prescription Technology Solutions segment totaled $1.3 billion, up 11% year over year. This uptick was due to growth in the technology services business and higher contributions from the third-party logistics businesses.
The segment reported an adjusted operating profit of $218 million, up 4% year over year, driven by growth in affordability and access solutions, partially offset by investments to support future growth.
Margins
Gross profit in the reported quarter was $3.25 billion, up 5.8% on a year-over-year basis. The figure represented 3.5% of net revenues, down nearly 50 basis points (bps) year over year.
The company reported an operating income of $578 million, down 39.2% from the year-ago quarter’s figure, primarily due to higher cost of sales. Operating margin was 0.6%, down almost 60 bps year over year.
Financial Update
Cash and cash equivalents totaled $2.51 billion compared with $2.3 billion a year ago.
Cumulative net cash provided by operating activities amounted to $720 million against cumulative net cash used in operating activities of $87 million in the year-earlier period.
Fiscal 2025 Guidance
McKesson raised its adjusted EPS guidance for fiscal 2025. It now expects adjusted EPS to be in the range of $32.40-$33.00 (previously $31.75-$32.55), which represents growth of 18-20% from the prior-year level. The Zacks Consensus Estimate for the same is pegged at $31.92. Revenues are expected to grow 15-17% from the prior-year figure.
McKesson Corporation Price, Consensus and EPS Surprise
McKesson Corporation price-consensus-eps-surprise-chart | McKesson Corporation Quote
Summing Up
McKesson exited the second quarter of fiscal 2025 on a strong note, with earnings and revenues beating estimates. Revenues reflect strong momentum in the U.S. pharmaceutical segment, driven by robust demand across its offerings. The company added a large distribution customer to its portfolio during the fiscal first quarter that strongly benefited the segment in the reported quarter.
Moreover, an improved Medical-Surgical business amid recovery in the primary care channel looks promising. The company has started initiatives to boost its operational efficiency and optimize cost, however, it will likely take a while to get reflected in the company’s performance.
Meanwhile, the decline in operating margin, reflecting higher costs and expenses, is likely to continue in the next quarter.
Zacks Rank and Stocks to Consider
McKesson currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks from the medical industry are AngioDynamics (ANGO - Free Report) , Masimo (MASI - Free Report) and Globus Medical (GMED - Free Report) .
AngioDynamics, sporting a Zacks Rank #1 (Strong Buy) at present, has an estimated growth rate of 38.2% for 2025. You can seethe complete list of today’s Zacks #1 Rank stocks here.
ANGO’s earnings surpassed estimates in three of the trailing four quarters and missed once, delivering an average surprise of 31.71%.
AngioDynamics’ shares have lost 19.2% year to date against the industry’s 6.1% growth.
Masimo, sporting a Zacks Rank of 1 at present, has an estimated growth rate of 10.4% for 2025. MASI’s earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 17.10%.
Masimo’s shares have risen 5.3% year to date compared with the industry’s 5.1% growth.
Globus Medical, carrying a Zacks Rank #2 (Buy) at present, has an estimated long-term growth rate of 12.7%. GMED’s earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 12.1%. Its shares have risen 38.7% year to date compared with the industry’s 6.1% growth.