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McKesson Corporation (MCK) distributes pharmaceuticals, medical-surgical supplies, and health and beauty care products. With a market cap of $65.7 billion, the company also develops, implements, and supports software that facilitates the integration of data throughout the health enterprise. In addition, McKesson offers analytics, care management, and patient solutions for payers.
Companies worth $10 billion or more are generally described as “large-cap stocks.” MCK effortlessly fits that category. McKesson is a leading player in U.S. pharmaceutical distribution, supported by a vast network and broad product range. Its diversified services, spanning drug distribution, medical-surgical supplies, and technology solutions, provide multiple revenue streams and help reduce dependency on any single business segment.
Despite its notable strengths, MCK slipped 19.9% from its 52-week high of $637.51, achieved on Aug. 2. Over the past three months, MCK stock has declined 13.7%, underperforming the S&P 500 Index’s ($SPX) 3.3% gains during the same time frame.
In the longer term, shares of MCK rose 10.3% on a YTD basis and climbed 20.4% over the past 52 weeks, compared to SPX’s YTD gains of 16.4% and solid 23.8% returns over the last year.
To confirm the bearish trend, MCK has traded below its 50-day moving average since early August. The stock has been trading below its 200-day moving average recently.
MCK’s weak price performance is driven by reduced contributions from access programs in its Prescription Technology Solutions segment and challenges in the Medical Surgical business. Operating margins have declined due to rising expenses, especially in technology investments, which are expected to persist in the next quarter.
On Aug. 7, MCK reported its Q1 earnings results, and its shares closed down more than 11% in the following trading session. Its adjusted EPS of $7.88 surpassed Wall Street expectations of $7.16. The company’s revenue was $79.3 billion, missing forecasts of $83.2 billion.
In the competitive arena of Medical Distribution, Cencora, Inc. (COR) has taken the lead over MCK, showing resilience with a 15% uptick on a YTD basis and solid 32.9% gains over the past 52 weeks.
Wall Street analysts are highly bullish on MCK’s prospects. The stock has a consensus “Strong Buy” rating from the 16 analysts covering it, and the mean price target of $630.07 suggests a potential upside of 23.4% from current price levels.
On the date of publication, Neha Panjwani did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
