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McKesson (MCK) Beats on Earnings in Q3, Inks Buyout Deal

McKesson CorporationMCK reported third-quarter fiscal 2017 (ended Dec 31, 2016) earnings of $3.03 per share, beating the Zacks Consensus Estimate of $2.95 but declining from the year-ago figure of $3.18.

Revenues, on the other hand, improved 5% year over year to $50.1 billion. However, the figure failed to meet the Zacks Consensus Estimate of $50.7 billion.

CoverMyMeds Acquisition Deal

McKesson announced that it has entered into an agreement to acquire privately owned company CoverMyMeds for approximately $1.1 billion. Columbus, OH, based CoverMyMeds provides electronic prior authorization solutions to pharmacies, providers, payers and pharmaceutical manufacturers. The transaction is expected to close in the first half of fiscal 2018.

Stock Performance

Over the last three months, the stock lost 12.87%, comparing unfavorably with the Zacks classified Medical/Dental Supplies sub industry's gain of 2.78%. However, a long-term expected earnings growth rate of 8.39% instills confidence in investors.

Quarter in Detail

McKesson operates through two segments - Distribution Solutions and Technology Solutions. All growth rates given below are on a year-over-year basis.

At Distribution Solutions, revenues grew 5.0% to $49.4 billion. North America pharmaceutical distribution and services reported sales of $41.7 billion, up 5.0%, reflecting market growth and acquisitions. Revenues were, however, hit by branded to generic conversions. Revenues from International pharmaceutical distribution and services were up 3.0% to $6.2 billion driven by acquisitions and market growth. Medical-Surgical distribution and services generated sales of $1.6 billion, down 1.0%.

However, revenues from the Technology Solutions business were flat at $0.7 billion. Quarterly revenues boosted by growth in other technology businesses were offset by the decline in hospital software business.

McKesson Corporation Price, Consensus and EPS Surprise

McKesson Corporation Price, Consensus and EPS Surprise | McKesson Corporation Quote

Fiscal 2017 Outlook

McKesson expects earnings per share in the range of $9.80 to $10.30 for fiscal 2017. Revenues from Distribution Solutions are projected to grow in the mid single digits. Revenues from Technology Solutions are expected to be down slightly on a year-over-year basis.

Zacks Rank & Key Picks

McKesson currently carries a Zacks Rank #4 (Sell). Better-ranked stocks in the broader medical sector include Addus Glaukos Corporation GKOS , ARIAD Pharmaceuticals, Inc. ARIA and Hologic, Inc. HOLX . All the three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here .

Glaukos Corporation has a long-term expected earnings growth rate of approximately 25%. Notably, the stock witnessed an impressive one-year return of 161.3%.

ARIAD Pharmaceuticals estimates sales growth of around 28.9% for the current year. Additionally, the company's one-year return of almost 365.1% is quite promising.

Hologic has a long-term expected earnings growth rate of approximately 10.32%. Notably, the stock registered an impressive one-year return of 12.6%.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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