Analyst Note| Soo Romanoff |
Narrow-moat McKesson reported another strong quarter, with revenue growth driving profit upside as it continues to flex its scale. The quarter continues to line up with the initial distributor trend, suggesting resumption of most patient volumes with the traction of elective volumes. The strength in the quarter was broad based, with normalized growth across all segments and services offerings. The company also continues to benefit from continued traction in specialty drugs that carry higher price points in addition to the Centers for Medicare & Medicaid Services designation as the centralized supplier of COVID-19 vaccine. Despite the mix shift toward this lower-margin revenue, the better-than-expected revenue provided leverage to handily exceed consensus expectations as tracked by First Call by $0.47. Management continues to be more confident with the trending recovery of volumes and anticipated vaccine benefit, and revised guidance for the second consecutive quarter. We are raising our full-year normalized EPS to $17.20 from $16.51, largely to reflect the better-than-anticipated quarter and better outlook with the $0.45-$0.65 benefit from COVID-19 kitting and vaccines.