McKesson Corporation

What they do

McKesson distributes branded, generic, specialty, biosimilar, and over-the-counter pharmaceutical drugs, along with other healthcare products, primarily in the U.S. and Canada. It operates four reportable segments: North American Pharmaceutical, Oncology & Multispecialty, Prescription Technology Solutions, and Medical-Surgical Solutions. The company also provides financial, operational, and clinical solutions to pharmacies and healthcare providers, including consulting, technology, and outsourcing services.

Revenue drivers

• North American Pharmaceutical — Largest segment; distributes pharmaceuticals and provides services to retail, hospital, and alternate-site pharmacies. Drives revenue growth through increased prescription volumes and specialty product distribution.
• Oncology & Multispecialty — Includes specialty drug distribution, the U.S. Oncology Network, infusion services, and cell and gene therapy via InspiroGene. Growth driven by increased specialty product distribution and oncology services.
• Prescription Technology Solutions — Combines automation and healthcare ecosystem navigation to connect patients with therapies. Focuses on operational efficiencies and cost optimization.
• Medical-Surgical Solutions — Provides medical-surgical products and solutions; a planned separation is underway. The segment had a 13% noncontrolling interest sold, impacting results.

Recent performance

For the first quarter of fiscal 2027 (ended June 30, 2026), McKesson reported revenues of $105.4 billion, up 8% year-over-year, driven by growth in North American Pharmaceutical and Oncology & Multispecialty. GAAP diluted EPS fell to $5.15 from $6.25, largely due to a $293 million redemption value adjustment for Medical-Surgical noncontrolling interests. Adjusted EPS rose 20% to $9.93, supported by operational growth and a lower share count. Operating cash flow was negative $220 million in the quarter, and free cash flow was negative $372 million. The company returned $2.6 billion to shareholders, including $2.5 billion in share repurchases.

Strategy

McKesson continues to advance the planned separation of its Medical-Surgical Solutions business. Management prioritizes strategic growth pillars, disciplined capital allocation, and returning excess cash to shareholders through buybacks and dividends. The company approved multi-year restructuring initiatives in Corporate and the Prescription Technology Solutions segment to optimize operating models and implement automation. These initiatives aim to improve efficiency, productivity, and long-term sustainable growth.

Risks

• Customer concentration — Ten largest customers, including GPOs, accounted for ~73% of fiscal 2026 revenues; CVS alone was ~24%. Loss or reduced purchases from a major customer could materially hurt results.
• Credit risk from customer bankruptcies — The Rite Aid bankruptcy in fiscal 2024 led to a $725 million bad debt charge; a material default or bankruptcy among other large customers could have a material adverse impact.
• Restructuring execution risk — Approved restructuring initiatives total between $230M-$310M (Corporate) and $200M-$250M (Prescription Technology Solutions); cost overruns or delays could impact profitability.
• Redeemable noncontrolling interests volatility — Quarterly adjustments to redemption values, like the $293 million hit in Q1 FY27, can cause significant earnings volatility.

Outlook

Management raised fiscal 2027 adjusted EPS guidance to $44.20-$45.00, implying 13-15% growth year-over-year. The company expects restructuring initiatives to be substantially complete by fiscal 2028 or 2029. McKesson does not forecast GAAP EPS.