McKesson stock (NYSE: MCK) hit a 3-month high in the pre-market trading session on Tuesday, November 2, after announcing solid earnings and revenue for its fiscal second quarter. The company attributed the results to widening growth in the U.S. Pharmaceutical segment.
The Texas-based distributor of medical supplies reported adjusted earnings of $6.15 per share, crushing the consensus forecast of $4.66 per share. In addition, total revenue for the quarter came in at $66.6 billion, beating analysts’ average estimate of $63.1 billion.
The results also beat the adjusted earnings of $4.80 per share and revenue of $60.81 billion McKesson posted for the comparable period of 2020.
“Our enterprise strategy is enabling us to successfully navigate a dynamic environment. McKesson delivered strong second-quarter results, including double-digit Adjusted Operating Profit growth across all segments…We remain committed to investing in our growth strategies of biopharma services and oncology ecosystems, while simultaneously increasing shareholder returns.”said Brian Tyler, CEO of McKesson
Segment-wise Sales Performance
Now, we will look at the year-over-year performance of McKesson’s key business divisions. Revenue from the U.S. pharmaceutical segment increased 11 percent to $53.4 billion in the quarter, while revenue from the prescription technology solutions segment climbed 40 percent to $932 million.
In comparison, revenue from the medical-surgical solutions segment jumped 23 percent to $3.1 billion, partly driven by higher sales of coronavirus tests. On the downside, revenue from the international segment fell 8 percent versus last year to $8.8 billion.
McKesson also noted that its operating profit improved quarter-on-quarter, which was driven by growth in distribution of specialty products to health systems and the contribution from COVID-19 vaccine distribution. The strong U.S Pharmaceutical segment is one of the key drivers in the jump in McKesson stock, however the companies guidance may be the most significant.
McKesson boosts earnings and revenue outlook – McKesson stock jumps
McKesson also raised its earnings outlook for its fiscal year 2022, citing improving operating performance. The company now expects to report adjusted earnings in the range of to $21.95 to $22.55 per share, compared to its previous guidance between $19.80 to $20.40 per share. The revised outlook translates to year-over-year growth of 27.5 to 31 percent.
As a general outlook on the remainder of fiscal year 2022, the company expects a return to “pre-COVID-19 levels of pharmaceutical prescription and patient engagement levels”. The company expects these two factors to improve pharmaceutical prescription volumes over the next two quarters.
McKesson to Exit U.K market
McKesson also made a major announcement along with its quarterly results. The company said it is selling its U.K-based retail and distribution businesses to asset management group Aurelius. The move is a part of its broader strategy to streamline its business.
“As we explore strategic options to fully exit Europe, this transaction provides our UK operation with the best path forward to achieve its long-term growth potential, while allowing McKesson to focus future investments in strategic growth areas outside of Europe.”said Brian Tyler, chief executive officer, McKesson.
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