McKesson (MCK) to Report Q2 Earnings: What's in the Cards?
McKesson Corporation MCK is scheduled to report second-quarter fiscal 2024 results on Nov 1, after market close.
The company delivered an earnings surprise of 24.27% in the last reported quarter. Its earnings beat estimates in three of the trailing four quarters and missed the same once, delivering an average surprise of 8.10%.
Q2 Estimates
The Zacks Consensus Estimate for McKesson’s earnings is pegged at $6.11 per share, implying an improvement of 0.8% from the prior-year quarter’s reported figure. The same for revenues is pinned at $75.83 billion, indicating a surge of 8.1% year over year.
Factors to Note
McKesson’s fiscal second-quarter results are expected to reflect segmental strength.
The U.S. Pharmaceutical and Specialty Solutions segment is likely to have acted as a key growth driver in the soon-to-be-reported quarter. Our estimate for this segment’s revenues is pegged at $62.7 billion, indicating an improvement of 10.2% from the prior-year quarter’s level.
The aforementioned segment is expected to have benefited from market growth and higher volumes from retail national account customers. However, branded-to-generic conversions might have weighed on its performance. Continued demand for MCK’s broad spectrum of specialty biopharmaceutical products to health systems is likely to have contributed to its performance. The availability of the recently approved acute myeloid leukemia drug, Vanflyta, through Biologics by McKesson might have brought additional growth during the fiscal second quarter.
In June, the company launched a curated private brand — Foster & Thrive — of over-the-counter (OTC) health and wellness products. MCK may provide an update on this OTC brand’s adoption during the second-quarter earnings call.
McKesson’s collaboration with the U.S. government over COVID-19 vaccine distribution highlighted its role in the COVID-19 response. However, COVID-19 tests, kitting storage and distribution of ancillary supplies are likely to have declined during the quarter, hurting the Medical-Surgical Solutions segment’s performance.
However, continued growth in the Prescription Technology Solutions segment is expected to have benefited the company’s top line in the to-be-reported quarter. Growth in the technology services’ revenues and an increase in prescriptions from third-party logistics are likely to have driven segmental performance.
Our top-line estimate for the Medical-Surgical and Prescription Technology Solutions segments is pegged at $2.56 billion and $1.16 billion, respectively.
Meanwhile, interest expenses are likely to have increased amid the rising interest-rate regime, hurting the bottom line. The price fluctuation of generic pharmaceuticals and stiff competition in the MedTech space are strong headwinds.
In August, McKesson expanded its partnership with the professional service firm, Genpact, to implement continued efficiency and automation capabilities to MCK’s finance operations, utilizing automation and AI solutions. This partnership should help McKesson reduce the cost of operations over the long term. The impact in the soon-to-be reported quarter remains to be seen.
McKesson Corporation Price and Consensus
McKesson Corporation price-consensus-chart | McKesson Corporation Quote
What the Zacks Model Unveils
Our proven model does not conclusively predict an earnings beat for McKesson this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. This is not the case here, as you will see below.
Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate ($6.04 per share) and the Zacks Consensus Estimate, is -1.20% for McKesson. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
Zacks Rank: McKesson currently sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Stocks to Consider
Here are some medical stocks worth considering as these have the right combination of elements to post an earnings beat this reporting cycle.
Dentsply Sirona XRAY has an Earnings ESP of +1.85% and a Zacks Rank of 2 at present.
The stock has gained 2.5% year to date. XRAY’s earnings beat estimates in the last reported quarter. It has a trailing four-quarter average earnings surprise of 12.51%.
Avanos Medical AVNS has an Earnings ESP of +3.45% and a Zacks Rank of 3 at present.
The stock has lost 32.5% year to date. AVNS’ earnings missed estimates in the last reported quarter. It has a trailing four-quarter average negative earnings surprise of 0.61%.
The Cooper Companies COO has an Earnings ESP of +0.32% and a Zacks Rank of 3 at present.
The stock has lost 2.8% year to date. COO’s earnings met estimates in the last reported quarter. It has a trailing four-quarter average earnings surprise of 0.09%.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.
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McKesson Corporation (MCK) : Free Stock Analysis Report
DENTSPLY SIRONA Inc. (XRAY) : Free Stock Analysis Report
The Cooper Companies, Inc. (COO) : Free Stock Analysis Report
AVANOS MEDICAL, INC. (AVNS) : Free Stock Analysis Report
