Medical Supplies-Focused McKesson Shares Fall On Q3 Earnings Performance, Analyst Says Street 'Wanted More'

Wednesday, McKesson Corporation MCK reported that third-quarter 2024 sales of $80.9 billion increased 15%, beating the consensus of $77.86 billion.

Revenue increases were primarily driven by growth in the U.S. Pharmaceutical segment, resulting from increased prescription volumes, including higher volumes from specialty products, retail national account customers, and GLP-1 medications (used to treat diabetes and obesity), partially offset by lower revenues in the International segment as a result of divestitures within McKesson’s European business.

Adjusted EPS reached $7.74, up 12% Y/Y, beating the consensus of $7.05.

U.S. Pharmaceutical Segment revenues were $73.0 billion, up 18%, driven by increased prescription volumes, including higher volumes from specialty products, retail national account customers, and GLP-1 medications.

Prescription Technology Solutions Segment revenues were $1.2 billion, an increase of 7%, driven by increased prescription volumes in technology services and third-party logistics businesses.

Also Read: Bankrupt Rite Aid, McKesson Strike Deal To Secure Steady Drug Deliveries.

Guidance: McKesson revised its fiscal year 2024 adjusted EPS outlook from $26.80- $27.40 to $27.25-$27.65 versus the consensus of $27.32.

Baird notes McKesson is still capitalizing on strong fundamentals in key sectors, such as U.S. Pharmaceutical Distribution and Prescription Technology Solutions. The organization’s efforts to streamline operations are proving successful and yielding positive outcomes.

Street “wanted more” Prescription Technology Solutions (RxTS) adjusted operating income (GLP-1 PA theme, Baird more cautious vs. upside dreamers), but the fourth quarter looks strong.

The analysts Eric Coldwell and Allison Jacobsen maintain the Outperform rating with a price target of $567, up from $519. 

Although McKesson’s valuation is relatively high compared to other distributors, Baird says the ongoing positive momentum in its core growth and improving outlook is favorable.

Citigroup also maintains McKesson stock with a Buy rating, raising the price target from $530 to $575. 

Price Action: MCK shares are down 5.22% at $490.00 on the last check Thursday.