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McKesson Corporation Just Recorded A 12% EPS Beat: Here's What Analysts Are Forecasting Next

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Simply Wall St
·3 min read
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As you might know, McKesson Corporation (NYSE:MCK) just kicked off its latest quarterly results with some very strong numbers. McKesson beat earnings, with revenues hitting US$61b, ahead of expectations, and statutory earnings per share outperforming analyst reckonings by a solid 12%. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.

Check out our latest analysis for McKesson

earnings-and-revenue-growth
earnings-and-revenue-growth

Taking into account the latest results, McKesson's 17 analysts currently expect revenues in 2021 to be US$238.8b, approximately in line with the last 12 months. Statutory earnings per share are predicted to accumulate 8.6% to US$14.23. In the lead-up to this report, the analysts had been modelling revenues of US$238.4b and earnings per share (EPS) of US$13.68 in 2021. The analysts seems to have become more bullish on the business, judging by their new earnings per share estimates.

There's been no major changes to the consensus price target of US$191, suggesting that the improved earnings per share outlook is not enough to have a long-term positive impact on the stock's valuation. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. There are some variant perceptions on McKesson, with the most bullish analyst valuing it at US$222 and the most bearish at US$150 per share. This shows there is still a bit of diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.

One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. We would highlight that McKesson's revenue growth is expected to slow, with forecast 2.0% increase next year well below the historical 4.4%p.a. growth over the last five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 6.8% per year. Factoring in the forecast slowdown in growth, it seems obvious that McKesson is also expected to grow slower than other industry participants.

The Bottom Line

The most important thing here is that the analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards McKesson following these results. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that McKesson's revenues are expected to perform worse than the wider industry. The consensus price target held steady at US$191, with the latest estimates not enough to have an impact on their price targets.

Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have estimates - from multiple McKesson analysts - going out to 2025, and you can see them free on our platform here.

Plus, you should also learn about the 2 warning signs we've spotted with McKesson .

This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.