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McKesson Corp MCK

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McKesson's Nonlinear Pandemic Recovery and Revised Outlook Cause Financial Whiplash; Raising FVE

Soo Romanoff Equity Analyst

Analyst Note

| Soo Romanoff |

Narrow-moat McKesson reported notably strong second-quarter revenue growth driving profit upside as it flexes scale. The early distributor trend suggests resumption of most patient volumes and associated spike in demand for personal protective equipment as providers reopen with heightened safety precautions. The quarter also benefited from continued strength in specialty drugs that carry higher prices in addition to the Health and Human Services vaccine kitting contract win. Despite the mix shift toward this lower-margin revenue, the government reimbursements for kitting preparation and the volume spike provided leverage to handily exceed expectations by nearly $0.90. Management pared back conservatism expressed in the prior quarter with revised guidance yet hedged with the potential for fluctuations with a nonlinear recovery. We are raising our full-year normalized EPS to $16.54 from $15.48, largely to reflect the better-than-anticipated quarter. There may be additional upside as vaccines are approved by the U.S. Food and Drug Administration (not reflected in guidance) as McKesson is the largest vaccine distributor.

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Company Profile

Business Description

McKesson is the largest leading third-party logistics providers. The company is engaged in wholesale pharmaceutical and medical products sourcing, distribution and dispensing, contract manufacturing, and related IT services to acute care hospitals and health systems, independent and chain retail pharmacies in North America, Europe, and Canada. Through acquisition and joint ventures McKesson also runs the fourth- largest pharmacy chain and provides technology and consulting services to manufacturers, pharmacies, physician offices, surgery centers, long-term care facilities, and home healthcare businesses.

6555 State Highway 161
Irving, TX, 75039
T +1 972 446-4800
Sector Healthcare
Industry Medical Distribution
Most Recent Earnings Sep 30, 2020
Fiscal Year End Mar 31, 2021
Stock Type Classic Growth
Employees 80,000