A month has gone by since the last earnings report for McKesson (MCK Quick QuoteMCK - Free Report) . Shares have added about 4.8% in that time frame, outperforming 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 Earnings and Revenues Beat Estimates in Q3

McKesson Corporation reported third-quarter fiscal 2022 adjusted earnings per share 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

Per McKesson’s segment realignment effective in the quarter under review, the reporting is as follows:

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.

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 earnings per share 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.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates revision.

The consensus estimate has shifted 6.12% due to these changes.

VGM Scores

Currently, McKesson has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. However, 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. It comes with little surprise McKesson has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.