McKesson MCK is witnessing strong momentum, with its shares having rallied 26.1% year to date against 1.5% decline of the industry. The S&P 500 composite has risen 16.9% during the same time frame.
With healthy fundamentals and strong growth opportunities, this Zacks Rank #3 (Hold) company appears to be a solid wealth creator for its investors at the moment.
Headquartered in San Francisco, CA, McKesson is a healthcare services and information technology company with two operating segments — Distribution Solutions and Technology Solutions. The first segment distributes branded and generic pharmaceutical drugs, along with other healthcare-related products, on a global basis. It also provides practice management, technology, clinical support and business solutions. The second segment offers enterprise-wide clinical, patient care, financial, supply-chain and strategic management software solutions.
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Catalysts Driving Growth
The rally in MCK’s shares can be attributed to the strength in its robust Biologics business. This optimism, led by a solid fourth-quarter performance and increasing demand for healthcare, is expected to contribute further.
Investors are particularly positive about McKesson’s Biologics business. The independent specialty pharmacy, Biologics by McKesson, has been making impressive progress lately. In June, Accord BioPharma selected it as a specialty pharmacy provider for CAMCEVI (leuprolide), approved for the treatment of adult patients with advanced prostate cancer.
The company recorded a significant uptick in its overall top line during the fourth quarter. This growth was primarily driven by the U.S. Pharmaceutical segment, which saw increased prescription volumes, including higher volumes from specialty products, retail national account customers and GLP-1 medications.
McKesson has been benefiting from improving demand across several verticals, especially surgeries, within the medical sector, following significant market disruption over the past three years due to COVID-19. The company is also seeing a recovery in demand-driven volumes. Additionally, rising product prices are boosting sales.
In April, McKesson launched Project Oasis, an initiative aimed at advancing health equity for at-risk populations in underserved communities. The rising demand for extended and primary care is expected to drive the top line of the Medical-Surgical business in fiscal 2025.
However, the Distribution Solutions segment has experienced weaker generic pharmaceutical pricing trends, which are likely to be partially offset by improving volumes.
McKesson Corporation Price
McKesson Corporation price | McKesson Corporation Quote
Stocks to Consider
Some better-ranked stocks in the broader medical space that have announced quarterly results are Haemonetics HAE, Intuitive Surgical ISRG and Boston Scientific Corporation BSX.
Haemonetics, currently carrying a Zacks Rank #2 (Buy), reported fourth-quarter fiscal 2024 adjusted earnings per share (EPS) of 90 cents, which beat the Zacks Consensus Estimate by 2.3%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Haemonetics’ shares have risen 7.1% year to date compared with the industry’s 3.2% growth. It has a long-term growth rate of 12%. HAE’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 13.24%.
Intuitive Surgical, carrying a Zacks Rank #2 at present, reported first-quarter 2024 adjusted EPS of $1.50, which beat the Zacks Consensus Estimate by 7.1%. Intuitive Surgical’s shares have risen 29.8% year to date compared with the industry’s 6.1% increase.
ISRG has a long-term growth rate of 16.1%. Its earnings surpassed estimates in each of the trailing four quarters, the average surprise being 6.78%.
Boston Scientific reported first-quarter 2024 adjusted EPS of 56 cents, which beat the Zacks Consensus Estimate by 9.8%. The company currently carries a Zacks Rank #2. Boston Scientific’s shares have risen 35.2% year to date compared with the industry’s 3.2% growth.
BSX has a long-term growth rate of 12.5%. Its earnings surpassed estimates in each of the trailing four quarters, the average surprise being 7.49%.
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