McKesson Corporation MCK is well poised for growth backed by multi-year strategic growth initiative and distribution solutions segment.
The stock has gained 16.5%, against the industry’s decline of 25.6% in a year’s time. Further, the S&P 500 Index has fallen 11.8% in the same timeframe.
The company — with a market capitalization of $22.29 billion — is a health care services and information technology company. It anticipates earnings to improve 6.1% over the next five years. Moreover, the company has a trailing four-quarter positive earnings surprise of 4.3%, on average.
The stock has a VGM Score of B. Our research shows that stocks with a VGM Score of A or B, when combined with a Zacks Rank #1 (Strong Buy) or 2 (Buy), are better picks than most.
Let’s take a closer look at the factors that substantiate the company’s Zacks Rank #2.
Factors to Bolster McKesson
McKesson recently announced a multi-year strategic growth initiative, focused on creating innovative new solutions that improve patient care delivery and drive incremental profit growth. The plan is to implement differential pricing for brand, generic, specialty, biosimilar and OTC (Over-the-counter) drug classes in line with services offered to both customers and manufacturers.
Per the fiscal third-quarter earnings call, McKesson is on track with its multi-year strategic growth initiative that is currently expected to generate approximately $400 million to $500 million (up from the previously guided range of $300-$400 million) in annual pre-tax gross savings. This will be substantially realized by the end of fiscal 2021.
Moreover, McKesson is a major player in the pharmaceutical and medical supplies distribution market. The Distribution Solutions segment caters to a wide range of customers and businesses, and stands to benefit from increased generic utilization, inflation in generics driven by several patent expirations in the next few years, and an aging population.
Additionally, the company has been actively pursuing deals, divestitures and acquisitions to drive growth. During the fiscal third-quarter 2020, CoverMyMeds and RxCrossroads announced the launch of AMP (Access for More Patients), which is a first-in-class technology driven patient support solution that transforms how patients access, afford and adhere to their medications.
For fiscal 2020, the Zacks Consensus Estimate for revenues is pegged at $228.20 billion, indicating an improvement of 6.5% from the year-ago period. The same for adjusted earnings per share stands at $14.80, suggesting growth of 9.1% from the prior-year reported figure.
Other Stocks to Consider
Some other top-ranked stocks from the broader medical space include AmerisourceBergen Corporation ABC, Patterson Companies, Inc. PDCO and The Cooper Companies, Inc. COO, each currently carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
AmerisourceBergen has an estimated long-term earnings growth rate of 7.4%.
Patterson Companies has an estimated long-term earnings growth rate of 8.5%.
Cooper Companies has a projected long-term earnings growth rate of 10.8%.
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AmerisourceBergen Corporation (ABC) : Free Stock Analysis Report
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