McKesson (MCK) to Report Q3 Earnings: What's in the Cards?

McKesson Corporation MCK is scheduled to report third-quarter fiscal 2022 results on Feb 2, after the opening bell.

The company delivered an earnings surprise of 31.7% in the last reported quarter. It beat estimates in each of the trailing four quarters, the average surprise being 19.9%.

Q3 Estimates

The Zacks Consensus Estimate for McKesson’s fiscal third-quarter earnings per share is pegged at $5.38, suggesting growth of 16.9% from the prior-year quarter. The same for revenues stands at $66.13 billion, indicating an improvement of 5.6% from the year-ago reported figure.

Factors to Note

McKesson expects fiscal third-quarter results to reflect segmental strength.

The U.S. Pharmaceutical and Specialty Solutions segment might have acted as a key growth driver in the quarter to be reported. In fact, the consensus mark for this segment’s revenues is pegged at $53.26 billion, indicating an improvement of 7.6% from the prior-year quarter.

The segment may have benefited from market growth and higher specialty volumes in the to-be-reported quarter. However, branded to generic conversions might have weighed on the segment’s performance. Nonetheless, the company’s broad spectrum of specialty biopharmaceutical providers and manufacturers is expected to have contributed to the fiscal third-quarter performance.

Growing demand for COVID-19 tests (owing to COVID-19 resurgence) and improvement in primary care patient visits are likely to have positively impacted the company’s Medical-Surgical solutions segment.

McKesson Corporation Price and EPS Surprise

McKesson Corporation price-eps-surprise | McKesson Corporation Quote

McKesson’s collaboration with the U.S. government's COVID-19 vaccine distribution effort highlighted the company’s role in the COVID-19 response. It was selected by the U.S. government as the centralized distributor of refrigerated and frozen COVID-19 vaccines and the ancillary kits used to administer those vaccines.

Per the fiscal first-quarter 2022earnings call the company’s U.S. and international distribution businesses have been playing a key role in the pandemic response. Meanwhile, its growing partnership with the United States government's COVID-19 vaccine distribution efforts reflects operational excellence and capabilities.

Through Oct 28, 2021, McKesson’s US Pharmaceutical business successfully distributed more than 311 million COVID-19 vaccines on behalf of the U.S. government, including vaccine distribution in the United States and related to the U.S. government’s international donation mission.

In the fiscal first quarter of 2022, the United States government asked McKesson to support their mission of sending millions of COVID-19 vaccines to countries in need globally. McKesson’s role in Canada continues to grow as it partners with local governments to distribute and administer COVID-19 vaccines there as well. Through September 2021, the company distributed more than 58 million vaccines to administration sites in select markets throughout these geographies.

These positive developments may get reflected in the fiscal third-quarter results.

With respect to the company’s corporate segment, opioid-related costs are expected to be around $155 million for fiscal 2022 (it incurred $36 million in the fiscal second quarter). Given the higher opioid-related costs and increased investment in the business, the company now estimates corporate expenses between $610 million and $660 million. Consequently, the fiscal third-quarter results are likely to reflect the impact of the same.

What the Zacks Model Unveils

Per our proven model, the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. That’s the case here.

Earnings ESP: McKesson has an Earnings ESP of +1.86%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: The company carries a Zacks Rank #3.

Stocks Worth a Look

Here are some medical stocks worth considering as these have the right combination of elements to post an earnings beat this quarter.

AMN Healthcare Services, Inc. AMN has an Earnings ESP of +10.29% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

AMN Healthcare’s long-term earnings growth rate is estimated at 16.2%. The company’s earnings yield of 5.5% compares favorably with the industry’s 0.8%.

Henry Schein, Inc. HSIC has an Earnings ESP of +2.62% and a Zacks Rank of 2.

Henry Schein’s long-term earnings growth rate is estimated at 11.8%. The company’s earnings yield of 5.9% compares favorably with the industry’s 4.1%.

Becton, Dickinson and Company BDX, also popularly known as BD, has an Earnings ESP of +3.20% and a Zacks Rank of 3.

BD’s long-term earnings growth rate is estimated at 6.5%. The company’s earnings yield of 4.9% compares favorably with the industry’s 4.4%.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

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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.