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McKesson Corporation MCK reported fourth-quarter fiscal 2025 adjusted earnings per share (EPS) of $10.12, which beat the Zacks Consensus Estimate of $9.81 by 3.2%. The bottom line, however, improved 63.8% on a year-over-year basis. The robust EPS growth was driven by solid top-line improvement on the back of strength in core pharmaceutical distribution business, expansion of the Oncology platform and continued growth of differentiated biopharma solutions.
GAAP EPS was $10.01, up 66.3% from the year-ago quarter’s level. (Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.)
Revenues of $90.82 billion missed the Zacks Consensus Estimate by 3.1%. The top line increased 18.9% year over year, primarily driven by the upside from continued momentum in the Pharmaceutical segment, especially for specialty products, including higher volumes in oncology. MCK also recorded increased prescription volumes during the quarter.
Higher contributions from the Prescription Technology Solutions and Medical-Surgical Solutions segments also aided the top line. However, International markets recorded declining sales due to the divestiture of the Canada-based Rexall and Well.ca retail businesses.
Shares of MCK were up 2.3% during after-hours trading on May 8, likely due to promising bottom-line performance as well as the company’s plans to divest its Medical-Surgical business. The company’s shares have gained 21.1% year to date against the industry’s 1.6% decline. The S&P 500 Index has declined 4.9% in the same time frame.
Revenues from the U.S. Pharmaceutical segment totaled $83.2 billion, up 21% year over year. Per management, the upside was primarily driven by increased prescription volumes, including higher volumes from retail national account customers and specialty products, and growth in the oncology platform.
The U.S. Pharmaceutical and Specialty Solutions segment reported an adjusted operating profit of $1.1 billion, up 17% from the prior-year quarter’s level. This was due to growth in the distribution of specialty products to providers and health systems, as well as higher volumes from retail national account customers.
Revenues from the International segment amounted to $3.5 billion, down 2% year over year. This decline was led by the divestiture of the Canada-based Rexall and Well.ca retail businesses, partially offset by higher pharmaceutical distribution volumes in the Canadian business.
Adjusted operating profit at the segment totaled $102 million, up 9% from the year-ago reported figure.
Revenues from the Medical-Surgical Solutions segment totaled $2.9 billion, up 1% year over year. Sales were driven by higher volumes of specialty pharmaceuticals, partially offset by lower volumes, customer mix, and product demand shifts across the primary care channel.
The Medical-Surgical segment reported an adjusted operating profit of $285 million, up 15% year over year. This was driven by operational efficiencies from the cost optimization initiatives.
Along with the earnings release, McKesson announced its plan to separate the Medical-Surgical Solutions segment into an independent company that will enhance the strategic opportunity and operational focus of the new company and the remaining businesses of McKesson.
Revenues from the Prescription Technology Solutions segment totaled $1.3 billion, up 14% year over year. This uptick was due to growth in the technology services business and higher contributions from the third-party logistics businesses.
The segment reported an adjusted operating profit of $235 million, up 34% year over year, driven by growth in affordability and access solutions.
Gross profit in the reported quarter was $3.39 billion, up 2.2% on a year-over-year basis. The figure represented 3.7% of net revenues, down nearly 60 basis points (bps) year over year.
The company reported an adjusted operating income of $1.72 billion, up 18.5% from the year-ago quarter’s figure, primarily due to lower selling, general & administrative expenses. Operating margin was 1.9%, flat year over year.
Cash and cash equivalents totaled $5.69 billion compared with $1.13 billion during the fiscal third quarter.
Cumulative net cash used in operating activities amounted to $6.09 billion compared with $4.31 billion in the year-earlier period.
McKesson issued ESP guidance of $36.75-$37.55 for fiscal 2026. The company did not provide total and segmental sales outlook amid its potential spin-off of the surgical business. It cannot reasonably forecast LIFO inventory-related adjustments, certain litigation loss and gain contingencies, restructuring, impairment and related charges, and other adjustments.
McKesson Corporation price-consensus-eps-surprise-chart | McKesson Corporation Quote
McKesson exited the fourth quarter of fiscal 2025 on a mixed note, with earnings beating estimates but sales missing the same. Despite the revenue miss, McKesson emphasized solid growth in oncology and biopharma services. Its U.S. Oncology Network expanded to 2,600 providers across 31 states, with over 1.4 million patients treated annually. Clinical trial operations, bolstered by the Sarah Cannon Research Institute joint venture, enrolled over 3,100 patients across more than 200 trials.
Biopharma services, including the RelayHealth platform, helped patients save $8.8 billion in medication costs and processed 94 million prescription access instances. The Prescription Technology Solutions segment saw 23% growth in adjusted operating profit, driven by increased use of affordability and access solutions. McKesson also highlighted new partnerships, notably expanding its distribution relationship with Optum, starting July 2024.
The company is actively investing in advanced technologies, including artificial intelligence and data analytics, to enhance operational efficiency and patient care outcomes. A key initiative involves leveraging AI for extracting insights from large volumes of unstructured oncology data to support real-world evidence generation and reduce clinician burden. McKesson is also prioritizing health equity through community-focused initiatives and expanding access to pharmacies in underserved areas.
MCK continues to build on its differentiated prescription technology and access solutions, supporting improved medication affordability and adherence. Capital allocation remains disciplined, with a focus on high-return investments and shareholder value, demonstrated by returning 92% of FY2024 free cash flow through dividends and share repurchases.
However, McKesson may face risks from reimbursement changes, GLP-1 market volatility and delays in AI implementation. Contract concentration, particularly with Optum, may pose earnings risk, while supply-chain disruptions and competitive pressures could affect growth and margins. The successful execution of strategic initiatives will be critical to sustaining long-term growth.
McKesson currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks from the same medical industry are AxoGen AXGN, Cardinal Health CAH and CVS Health CVS.
AxoGen, carrying a Zacks Rank #2 (Buy) at present, has an estimated growth rate of 76.9% for 2025. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
AXGN’s earnings beat estimates in each of the trailing four quarters, delivering an average surprise of 113.33%. AXGN’s shares have declined 23.6% so far this year.
Cardinal Health, carrying a Zacks Rank of 2 at present, has an estimated growth rate of 11.8% for fiscal 2026. CAH’s earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 10.30%. CAH’s shares have gained 24.5% so far this year.
CVS Health, carrying a Zacks Rank #2 at present, has an estimated earnings growth rate of 11.4% for 2025. The company’s earnings beat estimates in each of the trailing four quarters, delivering an average surprise of 18.08%. CVS’ shares have gained 51.2% so far this year.
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This article originally published on Zacks Investment Research (zacks.com).
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