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McKesson (MCK) Earnings and Revenues Beat Estimates in Q3
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McKesson Corporation (MCK - Free Report) reported third-quarter fiscal 2022 adjusted earnings per share (EPS) of $6.15, which beat the Zacks Consensus Estimate of $5.38 per share by 14.3%. The bottom line improved 34% on a year-over-year basis.
GAAP loss per share in the quarter was 4 cents, compared with a loss of $39.03 in the year-ago quarter.
Revenue Details
Revenues of $68.61 billion surpassed the Zacks Consensus Estimate by 3.2%. The top line increased 10% year over year.
Q3 Segmental Analysis
Revenues at the U.S. Pharmaceutical and Specialty Solutions segment were $55.04 billion, up 11% year over year. The metric improved 11% at constant currency (cc). Per management, the upside was primarily driven by market growth and an increase in volumes 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 $735 million, up 12% from the prior-year quarter. This can be attributed to the contribution from COVID-19 vaccine distribution and growth in the distribution of specialty products to providers and health systems.
McKesson Corporation Price, Consensus and EPS Surprise
At the International segment, revenues amounted to $9.46 billion, up 2% year over year as well as at cc on the back of sales to new customers in the Canadian business. However, the contribution of McKesson’s German wholesale business to a joint venture with Walgreens Boots Alliance (completed in third-quarter fiscal 2021) partially offset the upside.
Adjusted operating profit at the segment was $223 million, up 41% from the year-ago quarter.
Revenues at the Medical-Surgical Solutions segment totaled $3.08 billion, up 1% year over year as well at cc. Growth and improvement in the primary care business coupled with contribution from kitting, storage, and distribution of ancillary supplies for the U.S. government's COVID-19 vaccine program led to the upside. Lower revenues from COVID-19 tests, however, partially offset the improvement.
The Medical-Surgical segment delivered an adjusted operating profit of $330 million, which climbed 18% from the year-ago quarter owing to the contribution from kitting, storage, and distribution of ancillary supplies for the U.S. government's COVID-19 vaccine program and growth in the primary care business.
Revenues at the Prescription Technology Solutions segment totaled $1.03 billion, up 33% year over year and at cc. The improvement can be attributed to an increase in volumes associated with biopharma services, which includes third-party logistic services and higher technology and service revenue, partially resulting from prescription volume growth.
Adjusted operating profit was $145 million at the Prescription Technology Solutions segment, up 11% from the prior-year quarter.
Margins
Gross profit in the reported quarter was $3.43 billion, up 9% on a year-over-year basis. Meanwhile, gross margin accounted for 4.9% of net revenues, down 10 basis points (bps) on a year-over-year basis.
The company reported an operating income of $298 million, against the year-ago quarter’s operating loss of $7.36 billion.
Financial Update
In the quarter under review, cash and cash equivalents were $2.75 billion, compared with $2.15 billion in the previous quarter.
Cumulative net cash provided in operating activities in the fiscal third quarter amounted to $1.55 billion, up from $1.17 billion in the year-ago period.
Fiscal 2022 Guidance Raised
Backed by a robust fiscal third-quarter performance and higher contribution from the U.S. government’s COVID-19 vaccine distribution and kitting programs, McKesson has raised its fiscal 2022 earnings outlook.
For fiscal 2022, the company now projects adjusted EPS to be $23.55-$23.95 (up from the prior guided range of $22.35-$22.95). The raised outlook reflects solid operating performance and higher contribution from the U.S. government’s COVID-19 vaccine distribution, kitting and storage programs. The Zacks Consensus Estimate for the same is pegged at $22.74.
The abovementioned guidance assumes $1.75 to $2.15 associated with the U.S. government’s COVID-19 vaccine distribution, kitting and storage programs. The estimate includes 75-95 cents associated with COVID-19 tests and impairments for personal protective equipment and related products.
Summing Up
McKesson exited the fiscal third quarter on a strong note, wherein both earnings and revenues beat the Zacks Consensus Estimate. Strong fiscal third-quarter show by all the segments remains positive. Raised earnings outlook for fiscal 2022 instills optimism. Double-digit adjusted operating profit growth across all segments is encouraging.
The company played a key role in the COVID-19 response efforts in the United States and abroad through the distribution of COVID-19 vaccines, ancillary supply kits and COVID-19 tests.
Contraction in gross margin is disappointing. Price fluctuation of generic pharmaceuticals and stiff competition in the MedTech space are other headwinds.
Zacks Rank
Currently, McKesson carries a Zacks Rank #3 (Hold).
Key Picks
Some better-ranked stocks that are supposed to report earnings soon are Cerner Corporation , Baxter International Inc. (BAX - Free Report) and AMN Healthcare Services, Inc. (AMN - Free Report) .
The Zacks Consensus Estimate for Cerner’s fourth-quarter 2021 adjusted EPS is currently pegged at 88 cents. The consensus estimate for fourth-quarter 2021 revenues stands at $1.49 billion. The company currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Cerner has an estimated long-term growth rate of 12.8%. CERN’s earnings yield of 4% compares favorably with the industry’s negative yield.
Baxter currently has a Zacks Rank #2. The Zacks Consensus Estimate for its fourth-quarter 2021 adjusted EPS is currently pegged at $1.03. The consensus estimate for fourth-quarter revenues stands at $3.35 billion.
Baxter has an estimated long-term growth rate of 9.5%. BAX’s earnings yield of 4.9% compares favorably with the industry’s negative yield.
AMN Healthcare currently carries a Zacks Rank #2. The Zacks Consensus Estimate for its fourth-quarter 2021 adjusted EPS currently stands at $2.58. The consensus estimate for its revenues stands at $1.28 billion.
AMN Healthcare has an estimated long-term growth rate of 16.2%. AMN’s earnings yield of 6.7% compares favorably with the industry’s 1.1%.
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McKesson (MCK) Earnings and Revenues Beat Estimates in Q3
McKesson Corporation (MCK - Free Report) reported third-quarter fiscal 2022 adjusted earnings per share (EPS) of $6.15, which beat the Zacks Consensus Estimate of $5.38 per share by 14.3%. The bottom line improved 34% on a year-over-year basis.
GAAP loss per share in the quarter was 4 cents, compared with a loss of $39.03 in the year-ago quarter.
Revenue Details
Revenues of $68.61 billion surpassed the Zacks Consensus Estimate by 3.2%. The top line increased 10% year over year.
Q3 Segmental Analysis
Revenues at the U.S. Pharmaceutical and Specialty Solutions segment were $55.04 billion, up 11% year over year. The metric improved 11% at constant currency (cc). Per management, the upside was primarily driven by market growth and an increase in volumes 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 $735 million, up 12% from the prior-year quarter. This can be attributed to the contribution from COVID-19 vaccine distribution and growth in the distribution of specialty products to providers and health systems.
McKesson Corporation Price, Consensus and EPS Surprise
McKesson Corporation price-consensus-eps-surprise-chart | McKesson Corporation Quote
At the International segment, revenues amounted to $9.46 billion, up 2% year over year as well as at cc on the back of sales to new customers in the Canadian business. However, the contribution of McKesson’s German wholesale business to a joint venture with Walgreens Boots Alliance (completed in third-quarter fiscal 2021) partially offset the upside.
Adjusted operating profit at the segment was $223 million, up 41% from the year-ago quarter.
Revenues at the Medical-Surgical Solutions segment totaled $3.08 billion, up 1% year over year as well at cc. Growth and improvement in the primary care business coupled with contribution from kitting, storage, and distribution of ancillary supplies for the U.S. government's COVID-19 vaccine program led to the upside. Lower revenues from COVID-19 tests, however, partially offset the improvement.
The Medical-Surgical segment delivered an adjusted operating profit of $330 million, which climbed 18% from the year-ago quarter owing to the contribution from kitting, storage, and distribution of ancillary supplies for the U.S. government's COVID-19 vaccine program and growth in the primary care business.
Revenues at the Prescription Technology Solutions segment totaled $1.03 billion, up 33% year over year and at cc. The improvement can be attributed to an increase in volumes associated with biopharma services, which includes third-party logistic services and higher technology and service revenue, partially resulting from prescription volume growth.
Adjusted operating profit was $145 million at the Prescription Technology Solutions segment, up 11% from the prior-year quarter.
Margins
Gross profit in the reported quarter was $3.43 billion, up 9% on a year-over-year basis. Meanwhile, gross margin accounted for 4.9% of net revenues, down 10 basis points (bps) on a year-over-year basis.
The company reported an operating income of $298 million, against the year-ago quarter’s operating loss of $7.36 billion.
Financial Update
In the quarter under review, cash and cash equivalents were $2.75 billion, compared with $2.15 billion in the previous quarter.
Cumulative net cash provided in operating activities in the fiscal third quarter amounted to $1.55 billion, up from $1.17 billion in the year-ago period.
Fiscal 2022 Guidance Raised
Backed by a robust fiscal third-quarter performance and higher contribution from the U.S. government’s COVID-19 vaccine distribution and kitting programs, McKesson has raised its fiscal 2022 earnings outlook.
For fiscal 2022, the company now projects adjusted EPS to be $23.55-$23.95 (up from the prior guided range of $22.35-$22.95). The raised outlook reflects solid operating performance and higher contribution from the U.S. government’s COVID-19 vaccine distribution, kitting and storage programs. The Zacks Consensus Estimate for the same is pegged at $22.74.
The abovementioned guidance assumes $1.75 to $2.15 associated with the U.S. government’s COVID-19 vaccine distribution, kitting and storage programs. The estimate includes 75-95 cents associated with COVID-19 tests and impairments for personal protective equipment and related products.
Summing Up
McKesson exited the fiscal third quarter on a strong note, wherein both earnings and revenues beat the Zacks Consensus Estimate. Strong fiscal third-quarter show by all the segments remains positive. Raised earnings outlook for fiscal 2022 instills optimism. Double-digit adjusted operating profit growth across all segments is encouraging.
The company played a key role in the COVID-19 response efforts in the United States and abroad through the distribution of COVID-19 vaccines, ancillary supply kits and COVID-19 tests.
Contraction in gross margin is disappointing. Price fluctuation of generic pharmaceuticals and stiff competition in the MedTech space are other headwinds.
Zacks Rank
Currently, McKesson carries a Zacks Rank #3 (Hold).
Key Picks
Some better-ranked stocks that are supposed to report earnings soon are Cerner Corporation , Baxter International Inc. (BAX - Free Report) and AMN Healthcare Services, Inc. (AMN - Free Report) .
The Zacks Consensus Estimate for Cerner’s fourth-quarter 2021 adjusted EPS is currently pegged at 88 cents. The consensus estimate for fourth-quarter 2021 revenues stands at $1.49 billion. The company currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Cerner has an estimated long-term growth rate of 12.8%. CERN’s earnings yield of 4% compares favorably with the industry’s negative yield.
Baxter currently has a Zacks Rank #2. The Zacks Consensus Estimate for its fourth-quarter 2021 adjusted EPS is currently pegged at $1.03. The consensus estimate for fourth-quarter revenues stands at $3.35 billion.
Baxter has an estimated long-term growth rate of 9.5%. BAX’s earnings yield of 4.9% compares favorably with the industry’s negative yield.
AMN Healthcare currently carries a Zacks Rank #2. The Zacks Consensus Estimate for its fourth-quarter 2021 adjusted EPS currently stands at $2.58. The consensus estimate for its revenues stands at $1.28 billion.
AMN Healthcare has an estimated long-term growth rate of 16.2%. AMN’s earnings yield of 6.7% compares favorably with the industry’s 1.1%.