McKesson Corporation (MCK) Earnings & Analysis

Latest quarter

McKesson reported Q2 FY2027 revenue of $111.0 billion, up from $103.2 billion a year earlier and above the consensus estimate of $110.1 billion. Adjusted earnings were $11.68 per diluted share, compared with a consensus earnings estimate of $10.69 per share. Reported diluted earnings per share rose to $10.44 from $8.92.

The company’s filing attributed revenue growth chiefly to higher North American Pharmaceutical volumes from institutional providers and retail national accounts, alongside higher specialty pharmaceutical sales in Oncology & Multispecialty. It said branded-drug price decreases and conversions to generics partially offset growth.

McKesson said quarterly revenue also grew in Prescription Technology Solutions, driven primarily by third-party logistics volumes, and in Medical-Surgical Solutions, supported by extended and ambulatory care customers. The filing reported $46 million in quarterly charges related to the planned separation of Medical-Surgical Solutions.

Gross margin rose to 3.57% from 3.43%, while operating margin increased to 1.45% from 1.36%. McKesson reported $2.9 billion in free cash flow, compared with $2.2 billion a year earlier.

Adjusted EPS is the figure the consensus estimates, not the GAAP EPS above.

What management said on the call

CFO Kenny Cheung said North American Pharmaceutical growth came from higher prescription volumes, including specialty products and GLP-1 medications. He said lower branded-drug prices reduced year-over-year segment revenue growth, but did not have a meaningful impact on operating profit. In the second half, Cheung said, McKesson plans investments in automation, technology and business growth.

Cheung said demand for Prescription Technology Solutions included prior authorization services for GLP-1 and other medications. Discussing the CMS Medicare GLP-1 Bridge Program, he said “Prior authorization volumes have begun to normalize” after initial demand. He added that product launches, payer changes and program requirements can affect results from quarter to quarter.

CEO Brian Tyler said McKesson had completed its acquisition of Precision Medicine Group, adding clinical research expertise and services that complement its existing medication access and affordability offerings. Cheung said the business would report within Oncology & Multispecialty and estimated it would contribute approximately 10 to 20 cents of adjusted earnings per diluted share in fiscal 2027, weighted more heavily toward the fourth quarter.

Tyler also discussed McKesson’s proposed investment in Option Care Health, saying its home and ambulatory infusion services fit the company’s focus on care closer to patients. Cheung said the transaction was expected to close in the first half of calendar year 27, subject to shareholder and regulatory approvals; the current outlook excludes its contributions.

Asked about potential 340B policy changes, Tyler said it was difficult to know how changes would be implemented or how customers might respond. Cheung said, “we do not anticipate any material financial impact to our business,” adding that the company would monitor developments. Cheung also said the renewed CVS distribution contract begins October 1 and runs through June of 2032, and is included in the outlook.

Guidance

McKesson raised its FY2027 adjusted diluted EPS outlook to $45.60–$46.40 from $44.20–$45.00. Cheung said the company now expects revenue growth of 6 to 10% and operating profit growth of 12 to 16%, compared with its prior ranges of 5 to 9 percent and 9 to 13 percent, respectively.

For North American Pharmaceutical, Cheung forecast revenue growth of 5 to 9% and operating profit growth of 14 to 18%, versus the previous revenue range of 4 to 8 percent and operating-profit growth at the high end of 5.5 to 9.5%. For Medical-Surgical Solutions, he expects operating profit to range from a 4% decline to flat, compared with the earlier outlook of flat to 4% growth.