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McKesson (MCK) Up 7.7% Since Last Earnings Report: Can It Continue?
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A month has gone by since the last earnings report for McKesson (MCK - Free Report) . Shares have added about 7.7% 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 Corporation reported first-quarter fiscal 2023 adjusted earnings per share (EPS) of $5.83, which beat the Zacks Consensus Estimate of $5.31 per share by 9.8%. The bottom line improved 5% on a year-over-year basis.
GAAP earnings per share in the quarter were $5.25, up 69.9% from the year-ago quarter.
Revenue Details
Revenues of $67.2 billion surpassed the Zacks Consensus Estimate by 5.2%. The top line increased 7% year over year.
Q1 Segmental Analysis
Following McKesson’s segment realignment effective in the quarter under review, the reporting segments are as follows:
Revenues at the U.S. Pharmaceutical and Specialty Solutions segment were $56.9 billion, up 14% year over year. Per management, the upside was primarily driven by market growth and a higher volume of specialty products, including 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 $711 million, up 4% from the prior-year quarter. This was due to growth in the distribution of specialty products to providers and health systems, partially mitigated by lower demand for COVID-19 vaccine distribution. The adjusted metric for the segment was up 9%, excluding the impact of COVID-19 vaccine distribution
At the International segment, revenues amounted to $6.5 billion, down 23% year over year, courtesy divestitures of McKesson’s UK and Austrian businesses.
Adjusted operating profit at the segment was $152 million, down 11% from the year-ago quarter.
Revenues at the Medical-Surgical Solutions segment totaled $2.6 billion, up 3% year over year. Growth and improvement in the primary care business led to the upside, which was partially offset by lower sales of COVID-19 tests and lower contribution from kitting, storage, and distribution of ancillary supplies for the U.S. government’s COVID-19 vaccine program.
The Medical-Surgical segment delivered an adjusted operating profit of $268 million, which gained 4% from the year-ago quarter, owing to growth and improvements in the primary care business.
Revenues at the Prescription Technology Solutions segment totaled $1.1 billion, up 21% year over year. The improvement can be attributed to an increase in prescription and higher third-party logistics and technology services revenues.
Adjusted operating profit was $165 million at the Prescription Technology Solutions segment, up 19% from the prior-year quarter.
Margins
Gross profit in the reported quarter was $3 billion, down 4% on a year-over-year basis. Meanwhile, gross margin accounted for 4.5% of net revenues.
The company reported an operating income of $1.1 billion, up 4% from the year-ago quarter. Operating margin accounted for 1.6% of net revenues.
Financial Update
In the quarter under review, cash and cash equivalents were $3.53 billion, compared with $2.75 billion in the previous quarter.
Cumulative net cash provided in operating activities in the fiscal first quarter amounted to $4.43 billion, down from $4.54 billion in the year-ago period.
Fiscal 2023 Guidance Raised
For fiscal 2023, the company now projects adjusted EPS to be $23.95-$24.65, up from the previous guided range of $22.90-$23.60. The company raised the guidance following solid fiscal first-quarter results and the continuation of COVID-19 response efforts.
The earnings outlook includes 35 cents to 45 cents associated with the U.S. government’s COVID-19 vaccine distribution and another 75 cents to 95 cents associated with the U.S. government’s kitting, storage, and distribution of ancillary supplies program and COVID-19 tests. It also includes a negative impact of 11 cents related to year-to-date net gains and losses associated with McKesson Ventures' equity investments. The Zacks Consensus Estimate for the same is pegged at $23.26.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month.
VGM Scores
Currently, McKesson has a nice Growth Score of B, a grade with the same score on the momentum front. Charting a somewhat similar path, 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.
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McKesson (MCK) Up 7.7% Since Last Earnings Report: Can It Continue?
A month has gone by since the last earnings report for McKesson (MCK - Free Report) . Shares have added about 7.7% 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’s (MCK - Free Report) Q1 Earnings and Revenues Beat Estimates
McKesson Corporation reported first-quarter fiscal 2023 adjusted earnings per share (EPS) of $5.83, which beat the Zacks Consensus Estimate of $5.31 per share by 9.8%. The bottom line improved 5% on a year-over-year basis.
GAAP earnings per share in the quarter were $5.25, up 69.9% from the year-ago quarter.
Revenue Details
Revenues of $67.2 billion surpassed the Zacks Consensus Estimate by 5.2%. The top line increased 7% year over year.
Q1 Segmental Analysis
Following McKesson’s segment realignment effective in the quarter under review, the reporting segments are as follows:
Revenues at the U.S. Pharmaceutical and Specialty Solutions segment were $56.9 billion, up 14% year over year. Per management, the upside was primarily driven by market growth and a higher volume of specialty products, including 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 $711 million, up 4% from the prior-year quarter. This was due to growth in the distribution of specialty products to providers and health systems, partially mitigated by lower demand for COVID-19 vaccine distribution. The adjusted metric for the segment was up 9%, excluding the impact of COVID-19 vaccine distribution
At the International segment, revenues amounted to $6.5 billion, down 23% year over year, courtesy divestitures of McKesson’s UK and Austrian businesses.
Adjusted operating profit at the segment was $152 million, down 11% from the year-ago quarter.
Revenues at the Medical-Surgical Solutions segment totaled $2.6 billion, up 3% year over year. Growth and improvement in the primary care business led to the upside, which was partially offset by lower sales of COVID-19 tests and lower contribution from kitting, storage, and distribution of ancillary supplies for the U.S. government’s COVID-19 vaccine program.
The Medical-Surgical segment delivered an adjusted operating profit of $268 million, which gained 4% from the year-ago quarter, owing to growth and improvements in the primary care business.
Revenues at the Prescription Technology Solutions segment totaled $1.1 billion, up 21% year over year. The improvement can be attributed to an increase in prescription and higher third-party logistics and technology services revenues.
Adjusted operating profit was $165 million at the Prescription Technology Solutions segment, up 19% from the prior-year quarter.
Margins
Gross profit in the reported quarter was $3 billion, down 4% on a year-over-year basis. Meanwhile, gross margin accounted for 4.5% of net revenues.
The company reported an operating income of $1.1 billion, up 4% from the year-ago quarter. Operating margin accounted for 1.6% of net revenues.
Financial Update
In the quarter under review, cash and cash equivalents were $3.53 billion, compared with $2.75 billion in the previous quarter.
Cumulative net cash provided in operating activities in the fiscal first quarter amounted to $4.43 billion, down from $4.54 billion in the year-ago period.
Fiscal 2023 Guidance Raised
For fiscal 2023, the company now projects adjusted EPS to be $23.95-$24.65, up from the previous guided range of $22.90-$23.60. The company raised the guidance following solid fiscal first-quarter results and the continuation of COVID-19 response efforts.
The earnings outlook includes 35 cents to 45 cents associated with the U.S. government’s COVID-19 vaccine distribution and another 75 cents to 95 cents associated with the U.S. government’s kitting, storage, and distribution of ancillary supplies program and COVID-19 tests. It also includes a negative impact of 11 cents related to year-to-date net gains and losses associated with McKesson Ventures' equity investments. The Zacks Consensus Estimate for the same is pegged at $23.26.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month.
VGM Scores
Currently, McKesson has a nice Growth Score of B, a grade with the same score on the momentum front. Charting a somewhat similar path, 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.