McKesson Corporation (MCK) | Investment Case

1. Company Snapshot

1.a. Company Description

McKesson Corporation provides healthcare services in the United States and internationally.It operates through four segments: U.S. Pharmaceutical, International, Medical-Surgical Solutions, and Prescription Technology Solutions (RxTS).The U.S. Pharmaceutical segment distributes branded, generic, specialty, biosimilar, and over-the-counter pharmaceutical drugs and other healthcare-related products.

This segment also provides practice management, technology, clinical support, and business solutions to community-based oncology and other specialty practices; and consulting, outsourcing, technological, and other services, as well as sells financial, operational, and clinical solutions to pharmacies.The International segment offers distribution and services to wholesale, institutional, and retail customers in 13 European countries and Canada.The Medical-Surgical Solutions segment provides medical-surgical supply distribution, logistics, and other services to healthcare providers.

The RxTS segment serves biopharma and life sciences partners and patients to address medication challenges for patients throughout their journeys; connects pharmacies, providers, payers, and biopharma companies to deliver innovative access and adherence solutions; and provides third-party logistics and wholesale distribution support solutions.McKesson Corporation was founded in 1833 and is headquartered in Irving, Texas.

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1.b. Last Insights on MCK

McKesson Corporation's recent performance was driven by strong Q1 earnings, beating estimates with $8.26 per share, and raising its FY26 EPS view. The company's strategic priorities and growth strategies were highlighted at its Investor Day, showcasing progress in high-margin businesses, such as cancer medicines. A new organizational structure was announced, focusing on optimizing portfolio management. Additionally, McKesson lifted its annual profit forecast, aiming to boost growth through high-margin businesses. These efforts are expected to drive sustainable long-term value creation for shareholders.

1.c. Company Highlights

Last Price	810
Change Percentage	-0.51%
Open	812.49
Previous Close	814.18
Market Cap ( Millions)	101250
Volume	264403
Year High	895.58
Year Low	558.13
M A 50	811.37
M A 200	722.22

FCF Yield	5.67%
Dividend Yield	0.38%
ROE	-124.79%
Debt / Equity	-504.98%
Net Debt / EBIDTA	139.72%
Price To Book	-51.43
Price Earnings Ratio	31.98
Price To FCF	17.63
Price To sales	0.27
EV / EBITDA	20.91

2. McKesson's Strong Q2 FY2026 Earnings Driven by Diversified Portfolio

McKesson reported consolidated revenues of $103 billion, a 10% year-over-year increase, with adjusted earnings per diluted share rising 39% to $9.86, beating analyst estimates of $9.03. Gross profit increased 9% to $3.5 billion, while operating expenses decreased 1% to $2 billion, resulting in a quarterly record operating profit of $1.6 billion, a 26% year-over-year increase. The company's diversified portfolio and focused execution drove these results, with three segments delivering double-digit adjusted operating profit growth.

Publication Date: Nov -06

                                    📋 Highlights
                                    Revenue & Earnings Surge:
                                                Consolidated revenues rose 10% YoY to $103 billion, with adjusted EPS up 39% to $9.86.
Record Operating Profit:
                                                Operating profit hit $1.6 billion, a 26% YoY increase, driven by 9% gross profit growth ($3.5 billion) and 1% lower operating expenses ($2 billion).
Earnings Guidance Raised:
                                                Fiscal 2026 adjusted EPS guidance updated to $38.35–$38.85 (16–18% growth over prior year), including $0.13 accretion from Norway operations.
Free Cash Flow Strength:
                                                $2.2 billion in Q2 cash flow, with full-year guidance of $4.4–$4.8 billion, supporting $2.5 billion in share repurchases and $907 million returned to shareholders.
Segment Growth Outlook:
                                                Oncology & Multispecialty segment projected to grow revenue 27–31% and operating profit 49–53%, while Medical-Surgical Solutions growth slows to 2–6% due to lower illness season demand.

                                

Segment Performance

The North American Pharmaceutical segment and the newly formed Oncology and Multispecialty segment led revenue growth. The Oncology and Multispecialty segment is expected to see revenue growth of 27% to 31% and operating profit growth of 49% to 53%. The Prescription Technology Solutions segment also performed well, with 20% growth in the quarter.

Operational Efficiency and Investments

McKesson has made significant investments in automation and technology, including an order storage retrieval system, to support growing complexity in supply chain management. The company is also investing in AI to modernize their businesses and drive operating expense efficiency. SG&A expenses have been decreasing, and gross profit is accelerating due to the exit of Canada-based businesses and a more favorable mix of businesses.

Guidance and Outlook

The company raised its guidance on adjusted earnings per diluted share to $38.35 to $38.85, driven by robust core operational performance and contributions from recent acquisitions. Revenue growth is expected to be 11% to 15%, with operating profit growth of 12% to 16%. Analysts estimate next year's revenue growth at 12.7%.

Valuation

With a P/E Ratio of 33.33 and EV/EBITDA of 21.63, the stock appears to be reasonably valued considering its growth prospects. The company's strong operating performance and disciplined working capital management continue to provide ample liquidity and financial flexibility, with a Free Cash Flow Yield of 5.47%. The ROE is negative due to a negative book value, but ROIC is a healthy 17.16%, indicating good capital allocation.

3. NewsRoom

McKesson Corporation (MCK) Presents at Evercore 8th Annual Healthcare Conference Transcript

Dec -04

Source: seekingalpha.com

Brandes Investment Partners LP Sells 151,828 Shares of McKesson Corporation $MCK

Dec -02

Source: defenseworld.net

McKesson's Advancing Community Oncology Report Charts a New Era of Innovation for Biopharma and Community Care

Dec -01

Source: businesswire.com

Financial Survey: McKesson (NYSE:MCK) vs. Align Technology (NASDAQ:ALGN)

Dec -01

Source: defenseworld.net

3 Reasons Growth Investors Will Love McKesson (MCK)

Nov -24

Source: zacks.com

McKesson Corporation $MCK Shares Acquired by Bank Julius Baer & Co. Ltd Zurich

Nov -22

Source: defenseworld.net

Athena Investment Management Reduces Position in McKesson Corporation $MCK

Nov -20

Source: defenseworld.net

Banco Bilbao Vizcaya Argentaria S.A. Decreases Stock Holdings in McKesson Corporation $MCK

Nov -17

Source: defenseworld.net

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (10.70%)

6. Segments

U.S. Pharmaceutical

Expected Growth: 9.5%

The U.S. pharmaceutical segment is expected to grow at a rate slightly below the global average due to intense competition and potential pricing pressures. However, the ongoing demand for pharmaceuticals, including generics, will support its growth.

International

Expected Growth: 11.2%

The international segment is poised for slightly higher growth than the global average, driven by emerging market opportunities, diverse healthcare needs, and the potential for strategic expansions.

Medical-Surgical Solutions

Expected Growth: 7.5%

The growth in this segment is anticipated to be lower than the global average, as it is subject to fluctuations in healthcare utilization and potential consolidation among healthcare providers, which could impact procurement strategies.

Prescription Technology Solutions

Expected Growth: 14.2%

This segment is expected to grow significantly above the global average, driven by the increasing demand for digital healthcare solutions, the need for streamlined prescription processes, and the potential for innovation in patient care technologies.

7. Detailed Products

Pharmaceutical Distribution

McKesson's pharmaceutical distribution business provides prescription and over-the-counter medications, as well as vaccines and biopharmaceuticals, to pharmacies, hospitals, and clinics.

Medical-Surgical Distribution

McKesson's medical-surgical distribution business provides medical supplies, equipment, and services to healthcare providers, including hospitals, surgery centers, and physician offices.

Technology and Analytics

McKesson's technology and analytics business provides healthcare technology solutions, including electronic health records, revenue cycle management, and analytics, to healthcare providers.

Oncology and Specialty Care

McKesson's oncology and specialty care business provides specialty pharmaceuticals, medical supplies, and services to oncologists, hematologists, and other specialty physicians.

Retail Pharmacy Solutions

McKesson's retail pharmacy solutions business provides technology, services, and support to independent pharmacies, helping them to operate efficiently and effectively.

8. McKesson Corporation's Porter Forces

Forces Ranking

Threat Of Substitutes

McKesson Corporation operates in the healthcare industry, where there are limited substitutes for its pharmaceutical distribution and medical-surgical distribution services. However, the company faces some threat from online pharmacies and other alternative distribution channels.

Bargaining Power Of Customers

McKesson Corporation's customers, including hospitals, clinics, and pharmacies, have limited bargaining power due to the company's strong market position and diversified customer base.

Bargaining Power Of Suppliers

McKesson Corporation's suppliers, including pharmaceutical manufacturers, have some bargaining power due to the company's dependence on them for products. However, the company's large scale and diversified supplier base mitigate this risk.

Threat Of New Entrants

The threat of new entrants in the pharmaceutical distribution and medical-surgical distribution industries is low due to the high barriers to entry, including regulatory hurdles and the need for significant capital investment.

Intensity Of Rivalry

The pharmaceutical distribution and medical-surgical distribution industries are highly competitive, with several large players competing for market share. McKesson Corporation faces intense rivalry from companies such as AmerisourceBergen and Cardinal Health.

9. SWOT Analysis

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

	Value
Debt Weight	152.01%
Debt Cost	4.09%
Equity Weight	-52.01%
Equity Cost	6.19%
WACC	2.99%
Leverage	-292.29%

11. Quality Control: McKesson Corporation passed 5 out of 9 key points

Strong Liquidity

Low Debt

Strong Interest Coverage

Healthy Cash Flow

Operating Efficiency

Strong Return On Equity

Consistent Revenue Growth

Consistent Operating Cash Flow Growth

Margin Improvement

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

AbbVie

A-Score: 6.6/10

Value: 3.0

Growth: 4.7

Quality: 7.5

Yield: 7.0

Momentum: 8.5

Volatility: 9.0

1-Year Total Return ->

J&J

A-Score: 6.4/10

Value: 3.0

Growth: 4.0

Quality: 7.7

Yield: 6.0

Momentum: 8.0

Volatility: 10.0

1-Year Total Return ->

Cardinal Health

A-Score: 6.3/10

Value: 5.9

Growth: 6.6

Quality: 4.5

Yield: 4.0

Momentum: 9.0

Volatility: 7.7

1-Year Total Return ->

McKesson

A-Score: 6.2/10

Value: 5.4

Growth: 8.3

Quality: 4.5

Yield: 0.0

Momentum: 9.5

Volatility: 9.7

1-Year Total Return ->

Cencor

A-Score: 5.7/10

Value: 2.8

Growth: 6.8

Quality: 4.0

Yield: 2.0

Momentum: 9.0

Volatility: 9.7

1-Year Total Return ->

Regeneron Pharmaceuticals

A-Score: 4.2/10

Value: 4.2

Growth: 6.4

Quality: 8.6

Yield: 0.0

Momentum: 0.5

Volatility: 5.7

1-Year Total Return ->

Peers Metrics

12.e Scoring ^Insights

12.f DCF ^BETA

Parameters

Short Term Growth

-8.26%

Short term Time

10.0

Long-Term Growth

2.00%

WACC

2.99%

McKesson Corporation - US58155Q1031

1. Company Snapshot

1.a. Company Description

1.b. Last Insights on MCK

1.c. Company Highlights

Less Volatile

Higher Growth

Strong Momentum

Earnings Miss

Revenues Miss

Earnings Beats

Average Growth

Stable Momentum

Revenues Beats

Expensive

2. McKesson's Strong Q2 FY2026 Earnings Driven by Diversified Portfolio

Segment Performance

Operational Efficiency and Investments

Guidance and Outlook

Valuation

3. NewsRoom

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (10.70%)

6. Segments

U.S. Pharmaceutical

Expected Growth: 9.5%

International

Expected Growth: 11.2%

Medical-Surgical Solutions

Expected Growth: 7.5%

Prescription Technology Solutions

Expected Growth: 14.2%

7. Detailed Products

Pharmaceutical Distribution

Medical-Surgical Distribution

Technology and Analytics

Oncology and Specialty Care

Retail Pharmacy Solutions

8. McKesson Corporation's Porter Forces

Forces Ranking

Threat Of Substitutes

Bargaining Power Of Customers

Bargaining Power Of Suppliers

Threat Of New Entrants

Intensity Of Rivalry

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

11. Quality Control: McKesson Corporation passed 5 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

810.0$

Current Price

810$

Potential

-0.00%

Expected Cash-Flows

12.e Scoring ^Insights

12.f DCF ^BETA