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Here's Why You Should Add McKesson (MCK) to Your Portfolio
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McKesson Corporation (MCK - Free Report) is well poised for growth, backed by strategic collaborations and strength in the Distribution Solutions segment. However, the company’s opioid-related litigation expenses are a potential threat.
Shares of this Zacks Rank #2 (Buy) company have risen 10.6% year to date compared with the industry’s 12.6% growth. The S&P 500 Index has risen 15.6% in the same time frame.
McKesson is a healthcare services and information technology company with a market capitalization of $56.25 billion. Its earnings are anticipated to improve 10.8% over the next five years.
Image Source: Zacks Investment Research
The company’s bottom line beat estimates in three of the trailing four quarters and missed the same once, delivering an average surprise of 4.48%. Its earnings yield of 6.4% compares favorably with the industry’s 4.2%.
What’s Backing MCK?
McKesson continues to actively pursue deals, divestitures and acquisitions to drive growth. In April 2022, the company completed the divestiture of its retail and distribution businesses in the United Kingdom to Aurelius.
During fiscal 2022, MCK completed the sale of its Austrian business to Quadrifolia and the remaining share of its German joint venture to Walgreens Boots Alliance.
Earlier this year, the company completed the divestiture of all of its European businesses. These divestitures will allow McKesson to focus on its key growth market — the United States.
In October 2022, MCK completed formation of a joint venture with HCA Healthcare to create a fully integrated oncology research organization. Per the deal, McKesson and HCA will integrate their respective research units — U.S. Oncology Research (USOR) and Sarah Cannon Research Institute (SCRI).
The newly created entity, with the combined capabilities of SCRI and USOR, is expected to boost clinical research and drug development, lead to better data and analytic capabilities, and pave the way for a wider portfolio of clinical trials.
McKesson is a major player in the pharmaceutical and medical supplies distribution market. It stands to benefit from an increased generic utilization and inflation in generics, courtesy of an aging population and several patent expirations in the next few years. The Distribution Solutions segment caters to a wide range of customers and businesses.
During the fiscal fourth quarter of 2023, McKesson’s growth was led by strong performances across all segments, except the International segment, which was marred by unfavorable currency movement. The divestiture of the company’s European business also hurt its growth.
Last month, MCK launched its curated private brand of over-the-counter (OTC) health and wellness products, Foster & Thrive. The launch, expected to unify the company’s private brand portfolio, consolidates Health Mart and Sunmark branded OTC products. It is also expected to significantly strengthen McKesson’s Pharmacy & Healthcare Solutions business.
What’s Hurting the Stock?
McKesson’s broad settlement of opioid-related claims of states and municipalities is likely to increase its short-term expenses. Per the settlement deal, the company had to pay up to approximately $7.2 billion to the Settling Governmental Entities.
Estimates Trend
The Zacks Consensus Estimate for fiscal 2024 revenues is pegged at $294.48 billion, indicating a 6.4% increase from the previous year’s level. The same for adjusted earnings per share is pinned at $26.51, implying a 2.2% year-over-year improvement.
Alcon has an estimated long-term growth rate of 14.9%. Its earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 8.85%.
ALC’s shares have rallied 17.7% year to date compared with the industry’s 5.9% growth.
DexCom has an estimated long-term growth rate of 40.4%. Its earnings surpassed estimates in three of the trailing four quarters and met the same once, delivering an average surprise of 15.19%.
DXCM’s shares have risen 11.9% year to date compared with the industry’s 5.9% growth.
Hologic has an estimated earnings growth rate of 4.1% for fiscal 2024. HOLX’s earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 27.32%.
HOLX’s shares have risen 3.6% year to date compared with the industry’s 5.9% growth.
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Here's Why You Should Add McKesson (MCK) to Your Portfolio
McKesson Corporation (MCK - Free Report) is well poised for growth, backed by strategic collaborations and strength in the Distribution Solutions segment. However, the company’s opioid-related litigation expenses are a potential threat.
Shares of this Zacks Rank #2 (Buy) company have risen 10.6% year to date compared with the industry’s 12.6% growth. The S&P 500 Index has risen 15.6% in the same time frame.
McKesson is a healthcare services and information technology company with a market capitalization of $56.25 billion. Its earnings are anticipated to improve 10.8% over the next five years.
Image Source: Zacks Investment Research
The company’s bottom line beat estimates in three of the trailing four quarters and missed the same once, delivering an average surprise of 4.48%. Its earnings yield of 6.4% compares favorably with the industry’s 4.2%.
What’s Backing MCK?
McKesson continues to actively pursue deals, divestitures and acquisitions to drive growth. In April 2022, the company completed the divestiture of its retail and distribution businesses in the United Kingdom to Aurelius.
During fiscal 2022, MCK completed the sale of its Austrian business to Quadrifolia and the remaining share of its German joint venture to Walgreens Boots Alliance.
Earlier this year, the company completed the divestiture of all of its European businesses. These divestitures will allow McKesson to focus on its key growth market — the United States.
In October 2022, MCK completed formation of a joint venture with HCA Healthcare to create a fully integrated oncology research organization. Per the deal, McKesson and HCA will integrate their respective research units — U.S. Oncology Research (USOR) and Sarah Cannon Research Institute (SCRI).
The newly created entity, with the combined capabilities of SCRI and USOR, is expected to boost clinical research and drug development, lead to better data and analytic capabilities, and pave the way for a wider portfolio of clinical trials.
McKesson is a major player in the pharmaceutical and medical supplies distribution market. It stands to benefit from an increased generic utilization and inflation in generics, courtesy of an aging population and several patent expirations in the next few years. The Distribution Solutions segment caters to a wide range of customers and businesses.
During the fiscal fourth quarter of 2023, McKesson’s growth was led by strong performances across all segments, except the International segment, which was marred by unfavorable currency movement. The divestiture of the company’s European business also hurt its growth.
Last month, MCK launched its curated private brand of over-the-counter (OTC) health and wellness products, Foster & Thrive. The launch, expected to unify the company’s private brand portfolio, consolidates Health Mart and Sunmark branded OTC products. It is also expected to significantly strengthen McKesson’s Pharmacy & Healthcare Solutions business.
What’s Hurting the Stock?
McKesson’s broad settlement of opioid-related claims of states and municipalities is likely to increase its short-term expenses. Per the settlement deal, the company had to pay up to approximately $7.2 billion to the Settling Governmental Entities.
Estimates Trend
The Zacks Consensus Estimate for fiscal 2024 revenues is pegged at $294.48 billion, indicating a 6.4% increase from the previous year’s level. The same for adjusted earnings per share is pinned at $26.51, implying a 2.2% year-over-year improvement.
McKesson Corporation Price
McKesson Corporation price | McKesson Corporation Quote
Other Stocks to Consider
Some other top-ranked stocks from the broader medical space are Alcon (ALC - Free Report) , DexCom (DXCM - Free Report) and Hologic (HOLX - Free Report) , each carrying a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Alcon has an estimated long-term growth rate of 14.9%. Its earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 8.85%.
ALC’s shares have rallied 17.7% year to date compared with the industry’s 5.9% growth.
DexCom has an estimated long-term growth rate of 40.4%. Its earnings surpassed estimates in three of the trailing four quarters and met the same once, delivering an average surprise of 15.19%.
DXCM’s shares have risen 11.9% year to date compared with the industry’s 5.9% growth.
Hologic has an estimated earnings growth rate of 4.1% for fiscal 2024. HOLX’s earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 27.32%.
HOLX’s shares have risen 3.6% year to date compared with the industry’s 5.9% growth.