McKesson, the drug and health supplies distribution giant, badly missed sales estimates for the June fiscal first quarter late Wednesday. Its earnings topped views, with the help of stock buybacks. MCK stock took a beating in Thursday stock market action.
However, McKesson rivals Cencora and Cardinal Health largely sidestepped any selling pressure. That suggests McKesson's issues are specific to its business, rather than surfacing a wider problem for the health care sector.
McKesson cited a number of factors for the weaker-than-expected revenue, including a key customer's "shift from brand to biosimilar" for Humira, used to treat arthritis. The company also cited "significant less demand" for Covid test kits and related products. Additionally, McKesson noted a slow pace of product launches in the quarter.
Analysts were somewhat mixed on the significance of the soft Q2 results. Baird cut its price target on the stock by 23 to 671, though keeping an outperform rating, after a second straight quarter of misses on most key performance indicators.
However, Barclays raised its price target by 20 to 616, saying it still thinks McKesson can grow EPS by at least 10% per year.
Despite the disappointing results, McKesson's board approved a 15% dividend increase and authorized an additional $4 billion in stock buybacks.
McKesson Earnings
Estimates: Analysts expected EPS to dip 1% to $7.21, as revenue grew 11% to $82.53 billion.
Results: Adjusted EPS rose 8% to $7.88, though revenue rose 6% to $79.28 billion.
McKesson's diluted share count fell 4% from a year ago, bolstering EPS. McKesson also cited pretax gains of $110 million from McKesson Ventures' equity investments.
Outlook: McKesson raised its full-year EPS outlook to a range of $31.75 to $32.55, up 50 cents at the high and low end. Following the 67-cent EPS beat, the outlook for the second half of the year is a bit lighter than previously seen. Ahead of earnings, analysts were forecasting full-year EPS of $31.74.
MCK Stock Performance
McKesson shares dived 11.3% to 547.51 in Thursday stock market action, tumbling below the 50-day lien to a three-month low. McKesson has been a leader, hitting a record high last Friday, even as the broad market has come under pressure.
Cencora fell 1.7%, still near a buy point. Cardinal Health slipped 0.8%.
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