) third quarter fiscal 2013 (ended Dec 31, 2012) adjusted
earnings of $1.41 per share missed the Zacks Consensus Estimate
of $1.63 per share.
However, reported earnings came in at $1.24 per share, up from
$1.20 per share in the year-ago quarter, benefiting from lower
Revenues climbed 1% to $31.2 billion as brand-to-generics
continue to slow revenue growth. Revenues were marginally
short of the Zacks Consensus Estimate of $31.6 billion.
Quarter in Detail
McKesson operates through two segments: Distribution Solutions
and Technology Solutions.
Revenues at the Distribution Solutions segment increased 1% to
$30.4 billion in the reported quarter, driven by growth in the US
pharmaceutical direct distribution and services business. Strong
sales in the company's Medical-Surgical distribution business
also benefited segmental revenues in the third quarter of fiscal
2013. Revenues from the US pharmaceutical distribution business
came in at $26.8 billion, flat year over year. Revenues
from Canada grew 6% to $2.6 billion. However, the results in the
Distribution Solutions segment were impacted by a $40 million
pretax charge pertaining to a legal dispute in the Canadian
segment. Revenues from Medical-Surgical distribution and services
grew 15% to $874 million. The increase was attributable to market
growth, new customers, acquisitions and one additional sales
Revenues at the Technology Solutions segment were flat year
over year at $826 million. Segmental results were affected by $16
million due to the revenue deferral in the segment's
Operating expenses climbed 10% in the reported quarter to $1.1
billion. Meanwhile, the company's board of directors cleared an
additional $500 million share buyback program. We believe that
the buyback program highlights the company's commitment to create
value for shareholders. McKesson also expects to close its
PSS World Medical
) late in the fiscal fourth quarter. We note that McKesson inked
a deal to buy PSS World Medical, Inc. for $29.00 per share in
cash in 2012.
Fiscal 2013 Outlook
The company lowered its adjusted earnings outlook for fiscal
2013 due to the legal dispute charge in the Canadian business and
revenue deferral in the international technology business.
McKesson expects earnings (excluding special items) in the range
of $7.10-$7.30 per share (previous projection: $7.15 - $7.35
share). The Zacks Consensus Estimate for fiscal 2013 stands at
McKesson currently carries a Zacks Rank #3 (Hold).
Nevertheless, stocks like
CVS Caremark Corporation
) operate in the same sector as McKesson and currently look
attractive with a Zacks Rank #2 (Buy).
AMERISOURCEBRGN (ABC): Free Stock Analysis
CVS CAREMARK CP (CVS): Free Stock Analysis
MCKESSON CORP (MCK): Free Stock Analysis
PSS WORLD MED (PSSI): Free Stock Analysis
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