Medical supplies distributor McKesson is Wednesday's pick for IBD 50 Growth Stocks To Watch. McKesson stock is off a recent high and back in a buy zone. Shares appear to have been spared from the newest tariff target.
The pharmaceutical distributor's profit increases slowed in 2023 and 2024, but estimates show earnings growth more than tripling for the current fiscal year.
McKesson stores and distributes pharmaceuticals and wholesale medical supplies to pharmacies and hospitals. It also develops pharmacy management software, provides clinical trial services and offers cell and gene therapy services through its InspiroGene business unit.
Drug stocks got rocked after fresh tariff news surfaced late Tuesday when President Donald Trump said: "We're going to be announcing very shortly a major tariff on pharmaceuticals."
Since the IBD 50 stock is not a drug manufacturer, it appears McKesson sidestepped the "pharma drama" occurring Wednesday morning. Drug makers such as Pfizer, Eli Lilly and Merck dropped substantially in the wake of Trump's remarks.
What To Do When Growth Stocks Backtrack To Test Buy Points
McKesson Stock Back In Buy Zone
McKesson stock reached a record high Friday morning before reversing sharply in the general market sell-off. Volume was heavy during its three-day decline.
Shares climbed for seven straight weeks before reversing. After being extended, the stock retreated to what would normally be the buy zone up to 664.22 of a cup-with-handle base with a 632.59 a buy point, according to MarketSurge pattern recognition.
Investors should be cautious of breakouts and new buys during the current market correction and should follow risk management rules, including cutting losses at 7%. Be sure to read the daily IBD Big Picture column for current market analysis.
McKesson is finding support at its 50-day moving average. But the stock fell below its 21-day exponential moving average Monday, where it is finding resistance.
Its relative strength line had climbed steeply since mid-February but reversed lower Friday.
Profit Growth Looks To Pick Up
McKesson reported better-than-expected fiscal third-quarter earnings but missed sales estimates on Feb. 5.
Management raised its forecast on fiscal 2025 adjusted earnings to $32.55 to $32.95 a share, up from the previous range of $32.40 to $33 a share, in the earnings release. The company has been a steady profit grower as seen in its Earnings Stability factor of 7 out of a possible 99 — with a lower number being better.
After profit growth slowed to 9% in fiscal 2023 and 6% in 2024, analysts called for fiscal 2025 profit to rise 19% then 12% in fiscal 2026. Fiscal fourth-quarter revenue forecasts show 23% growth then easing to 8% over the next four quarters.
The medical supplies stock holds an IBD Composite Rating of 96 out of best-possible 99. And its Earnings Per Share Rating stands at 86.
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