McKesson (MCK) Earnings and Revenues Beat Estimates in Q2
McKesson Corporation MCK reported second-quarter fiscal 2022 adjusted earnings per share (EPS) of $6.15, which beat the Zacks Consensus Estimate of $4.67 per share by 31.7%. The bottom line improved 28% on a year-over-year basis.
GAAP EPS in the quarter was $3.09, down 51.7% from the year-ago quarter.
Revenue Details
Revenues of $66.58 billion surpassed the Zacks Consensus Estimate by 6.1%. The top line increased 9% year over year.
Q2 Segmental Analysis
Per McKesson’s segment realignment effective in the quarter under review, the reporting is as follows:
Revenues at the U.S. Pharmaceutical and Specialty Solutions segment were $53.41 billion, up 11.1% year over year. The metric improved 11% at constant currency (cc). Per management, the upside was primarily driven by market growth and increase in specialty volumes. However, branded to generic conversions partially offset the upside.
The U.S. Pharmaceutical and Specialty Solutions segment reported adjusted operating profit of $735 million, up 12% from the prior-year quarter.
McKesson Corporation Price, Consensus and EPS Surprise
McKesson Corporation price-consensus-eps-surprise-chart | McKesson Corporation Quote
At the International segment, revenues amounted to $9.11 billion, down 5% year over year. The metric fell 8% at cc due to the contribution of McKesson’s German wholesale business to a joint venture with Walgreens Boots Alliance (completed in third-quarter fiscal 2021). Recovery in volume in the pharmaceutical distribution and retail pharmacy businesses partially offset the downside.
Adjusted operating profit at the segment was $155 million, up 34% from the year-ago quarter.
Revenues at the Medical-Surgical Solutions segment totaled $3.12 billion, up 23% year over year as well at cc. Higher demand for COVID-19 tests and improvement in primary care business contributed to the upside.
The Medical-Surgical segment delivered an adjusted operating profit of $319 million, which surged 52% from the year-ago quarter.
Revenues at the Prescription Technology Solutions segment totaled $932 million, up 40% year over year and at cc. The improvement can be attributed to increase in volumes of technology and service offerings to lend support to biopharma customers, and prescription volume growth.
Adjusted operating profit was $144 million at the Prescription Technology Solutions segment, up 38% from the prior-year quarter.
Margins
Gross profit in the reported quarter was $3.35 billion, up 12% on a year-over-year basis. Meanwhile, gross margin accounted for 5% of net revenues, up 10 basis points (bps) on a year-over-year basis.
The company reported an operating income of $539 million, down 15% from the year-ago quarter. Operating margin accounted for 0.8% of net revenues, down 20 bps from the prior-year quarter.
Financial Update
In the quarter under review, cash and cash equivalents were $2.15 billion, compared with $2.42 billion in the previous quarter.
Cumulative net cash provided in operating activities in the fiscal second quarter amounted to $170 million, against the net cash used of $41 million in the year-ago period.
Fiscal 2022 Guidance Raised
Backed by a robust second-quarter performance and higher contribution from the U.S. government’s COVID-19 vaccine distribution and kitting programs, McKesson has raised its fiscal 2022 earnings outlook.
For fiscal 2022, the company now projects adjusted EPS to be $21.95-$22.55 (up from the prior guided range of $19.80-$20.40). The raised outlook reflects solid operating performance and higher contribution from the U.S. government’s COVID-19 vaccine distribution, kitting and storage programs. The Zacks Consensus Estimate for the same is pegged at $20.26.
The abovementioned guidance assumes $1.30 to $1.80 associated with the U.S. government’s COVID-19 vaccine distribution, kitting and storage programs.
Summing Up
McKesson exited the fiscal second quarter on a strong note, wherein both earnings and revenues beat the Zacks Consensus Estimate. Strong fiscal second-quarter show by three of the four segments remains a positive. Raised earnings outlook for fiscal 2022 instills optimism. Double-digit adjusted operating profit growth across all segments is encouraging.
The company played a key role in the COVID-19 response efforts in the United States and abroad, through the distribution of COVID-19 vaccines, ancillary supply kits and COVID-19 tests.
Contraction in operating margin remains a woe. Price fluctuation of generic pharmaceuticals and stiff competition in the MedTech space are other headwinds.
Zacks Rank
Currently, McKesson carries a Zacks Rank #3 (Hold).
Earnings of Other MedTech Majors at a Glance
Some better-ranked stocks in the broader medical space that have already announced their quarterly results are Thermo Fisher Scientific Inc. TMO, West Pharmaceutical Services, Inc. WST, and AngioDynamics, Inc. ANGO. While both Thermo Fisher and AngioDynamics sport a Zacks Rank of 1 (Strong Buy), West Pharmaceutical carries a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Thermo Fisher reported third-quarter 2021 adjusted EPS of $5.76, which beat the Zacks Consensus Estimate by 23.3%. Third-quarter revenues of $9.33 billion outpaced the consensus mark by 12%.
West Pharmaceutical reported third-quarter 2021 adjusted EPS of $2.06, which surpassed the Zacks Consensus Estimate by 13.2%. Third-quarter revenues of $706.5 million outpaced the Zacks Consensus Estimate by 3.2%.
AngioDynamics reported first-quarter fiscal 2022 loss per share of 2 cents, narrower than the Zacks Consensus Estimate of a loss of 5 cents. Revenues of $76.9 million surpassed the Zacks Consensus Estimate by 8.4%.
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