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McKesson rises on tech plans, 2014 outlook

NEW YORK (AP) -- Shares of McKesson Corp. climbed Wednesday after the prescription drug distributor offered a solid outlook for the new year and said it is streamlining its business.

THE SPARK: McKesson said Tuesday that it agreed to sell its 49 percent stake in Nadro SA, a drug distribution company in Mexico. It is also making changes to its technology business, as it will exit its international technology and hospital automation units.

McKesson said its net income fell 50 percent in the fiscal fourth quarter, mainly because it took a $191 million impairment charge related to the Nadro sale and a $16 million charge related to the other moves. The company also reported charges related to job cuts and facility closures.

The San Francisco company said its net income sank to $259 million, or $1.10 per share, for the three months ended March 31 from $521 million, or $2.09 per share. It said impairment charges totaled 76 cents per share during the quarter, and severance and exit charges totaled 11 cents per share. It said its adjusted earnings were $1.45 per share.

Revenue fell 3 percent to $30.62 billion from $31.7 billion. FactSet says analysts expected the company to report $32 billion in revenue,

THE BIG PICTURE: During the quarter McKesson bought PSS World for $1.46 billion. PSS makes and distributes medical products, with its business focused in the physician and laboratory markets.

For this fiscal year, McKesson said it expects to earn between $7.90 and $8.20 in the new fiscal year. Analysts had forecast net income of $8.04 per share on average.

THE ANALYSIS: Citi Investment Research analyst George Hill wrote that McKesson "is sharpening its focus on more attractive and mature markets where is does business." He kept a "Buy" rating on the shares and raised his price target to $130 per share from $128.

Cowen & Co. analyst Charles Rhyee wrote that the company's 2014 outlook is better than he expected, and said McKesson's management tends to be conservative. He kept an "Outperform" rating on the stock.

SHARE ACTION: Shares of McKesson advanced $7.53, or 6.8 percent, to $116.07 in afternoon trading. The stock has risen 12 percent in 2013 and reached an all-time high of $115.94 earlier Wednesday.