McKesson Corporation
(
MCK
) recently backed its outlook for fiscal 2013 (ending March 31,
2013), which was provided on April 30, 2012, while releasing its
fiscal 2012 fourth-quarter and full-year results.
McKesson continues to expect fiscal 2013 earnings (excluding
special items) in the range of $7.05 - $7.35 per share. The Katz
Group acquisition, completed in the final quarter of fiscal 2012,
is expected to contribute $0.15 to fiscal 2013 earnings. The Zacks
Consensus Estimate of $7.24 per share is well within the guidance
range provided by the company.
We note that McKesson operates through two segments:
Distribution Solutions and Technology Solutions. The Distribution
Solutions segment distributes ethical and proprietary drugs,
medical-surgical supplies and equipment, and health and beauty care
products throughout North America. The Technology Solutions segment
delivers enterprise-wide clinical, patient care, financial, supply
chain, and strategic management software solutions, pharmacy
automation for hospitals, as well as connectivity, outsourcing and
other services.
The company expects Distribution Solutions revenue to grow at
market rates and Technology Solutions revenues to experience the
same level of growth as in fiscal 2012.
For fiscal 2013, McKesson expects to generate cash flow from
operating activities in the range of $2.0 - $2.5 billion.
Our Take
McKesson, based in San Francisco, California, is a major player
in the pharmaceutical and medical supplies distribution market. The
company's Distribution Solutions segment continues to perform well,
with sales increasing 9.6% to $119.4 billion in fiscal 2012. This
segment caters to a wide range of customers and businesses and
should benefit from increased generic utilization and an aging
population.
Due to the economic slowdown, a large number of people are
moving toward higher-margin generic drugs, and the use of generic
drugs should increase significantly over the next few years as
several branded prescription drugs are scheduled to go off patent.
Additionally, drugs like
Pfizer
's (
PFE
) Lipitor lost patent protection in calendar year 2011. The
Distribution Solutions segment should continue witnessing growth
and will remain a major contributor to total revenues.
We are also impressed by McKesson's growth-by-acquisition
strategy. The company has made several acquisitions over the past
few years and is on the lookout for more prudent acquisitions to
drive growth.
We have a Neutral recommendation on McKesson. Our long-term
stance is in line with the Zacks #3 Rank (Hold rating) carried by
the company in the short run.
MCKESSON CORP (MCK): Free Stock Analysis Report
PFIZER INC (PFE): Free Stock Analysis Report
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