McKesson Earnings: Solid Growth Momentum in Distribution and Technology Lifts Valuation but Shares Still Pricey

Narrow-moat McKesson reported third-quarter results that were largely in line with our expectations. Total sales grew 18% year over year to $95.3 billion, driven by strong momentum in the US pharmaceutical segment, which posted a 19% revenue increase. This growth was propelled by higher prescription volumes, expanded distribution of specialty products—particularly in oncology and specialty care settings—and surging demand for GLP-1 (weight-loss) products. GLP-1 sales reached $10.9 billion this quarter, up 45% year over year, and we expect this strong growth trajectory to continue. The prescription technology segment also performed well, with revenue up 14%, supported by increased demand for the firm's third-party logistics and services business. With strong execution across most of its core businesses, McKesson raised revenue and margin guidance for the pharmaceutical and technology segments as well as adjusted EPS guidance to $32.55-$32.95. After updating our model and accounting for the time value of money, we lift our fair value estimate to $550 per share from $530.