We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
McKesson Corporation (MCK) Hits Fresh High: Is There Still Room to Run?
Read MoreHide Full Article
Shares of McKesson (MCK - Free Report) have been strong performers lately, with the stock up 5.5% over the past month. The stock hit a new 52-week high of $508.09 in the previous session. McKesson has gained 9% since the start of the year compared to the 3.6% move for the Zacks Medical sector and the 1.8% return for the Zacks Medical - Dental Supplies industry.
What's Driving the Outperformance?
The stock has a great record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on November 1, 2023, McKesson reported EPS of $6.23 versus consensus estimate of $6.11.
For the current fiscal year, McKesson is expected to post earnings of $27.27 per share on $304.85 billion in revenues. This represents a 5.13% change in EPS on a 10.17% change in revenues. For the next fiscal year, the company is expected to earn $31.09 per share on $328.14 billion in revenues. This represents a year-over-year change of 14.03% and 7.64%, respectively.
Valuation Metrics
McKesson may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company has run ahead of itself.
On this front, we can look at the Zacks Style Scores, as they provide investors with an additional way to sort through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. The idea behind the style scores is to help investors pick the most appropriate Zacks Rank stocks based on their individual investment style.
McKesson has a Value Score of A. The stock's Growth and Momentum Scores are B and F, respectively, giving the company a VGM Score of A.
In terms of its value breakdown, the stock currently trades at 18.5X current fiscal year EPS estimates, which is not in-line with the peer industry average of 18.6X. On a trailing cash flow basis, the stock currently trades at 15.7X versus its peer group's average of 11.9X. Additionally, the stock has a PEG ratio of 1.77. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.
Zacks Rank
We also need to consider the stock's Zacks Rank, as this supersedes any trend on the style score front. Fortunately, McKesson currently has a Zacks Rank of #2 (Buy) thanks to favorable earnings estimate revisions from covering analysts.
Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if McKesson passes the test. Thus, it seems as though McKesson shares could still be poised for more gains ahead.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
McKesson Corporation (MCK) Hits Fresh High: Is There Still Room to Run?
Shares of McKesson (MCK - Free Report) have been strong performers lately, with the stock up 5.5% over the past month. The stock hit a new 52-week high of $508.09 in the previous session. McKesson has gained 9% since the start of the year compared to the 3.6% move for the Zacks Medical sector and the 1.8% return for the Zacks Medical - Dental Supplies industry.
What's Driving the Outperformance?
The stock has a great record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on November 1, 2023, McKesson reported EPS of $6.23 versus consensus estimate of $6.11.
For the current fiscal year, McKesson is expected to post earnings of $27.27 per share on $304.85 billion in revenues. This represents a 5.13% change in EPS on a 10.17% change in revenues. For the next fiscal year, the company is expected to earn $31.09 per share on $328.14 billion in revenues. This represents a year-over-year change of 14.03% and 7.64%, respectively.
Valuation Metrics
McKesson may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company has run ahead of itself.
On this front, we can look at the Zacks Style Scores, as they provide investors with an additional way to sort through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. The idea behind the style scores is to help investors pick the most appropriate Zacks Rank stocks based on their individual investment style.
McKesson has a Value Score of A. The stock's Growth and Momentum Scores are B and F, respectively, giving the company a VGM Score of A.
In terms of its value breakdown, the stock currently trades at 18.5X current fiscal year EPS estimates, which is not in-line with the peer industry average of 18.6X. On a trailing cash flow basis, the stock currently trades at 15.7X versus its peer group's average of 11.9X. Additionally, the stock has a PEG ratio of 1.77. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.
Zacks Rank
We also need to consider the stock's Zacks Rank, as this supersedes any trend on the style score front. Fortunately, McKesson currently has a Zacks Rank of #2 (Buy) thanks to favorable earnings estimate revisions from covering analysts.
Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if McKesson passes the test. Thus, it seems as though McKesson shares could still be poised for more gains ahead.