Earnings Highlights and Review: McKesson’s Quarterly Revenue Grew 4%; Adjusted EPS Climbed 8%

LONDON, UK / ACCESSWIRE / June 8, 2017 / Pro-Trader Daily publishes post-earnings coverage on McKesson Corp. (NYSE: MCK) following the Company’s release of its fourth quarter and fiscal 2017 financial results on May 18, 2017. The prescription drug distributor surpassed earnings expectations. Our daily stock reports are accessible for free, and with those to look forward today you also will be signing up for a complimentary member’s account at:

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Earnings Reviewed

McKesson reported that revenues for the fourth quarter ended March 31, 2017, were $48.71 billion, up 4% compared to $46.68 billion for Q4 FY16. The Company’s revenue numbers missed analysts’ consensus estimates of $49.78 billion. For the fiscal year 2017, McKesson reported revenues of $198.53 billion, up 4% compared to $190.88 billion in the year ago same period.

On a GAAP basis, McKesson’s earnings per diluted share from continuing operations was $16.79 for Q4 FY17 compared to $1.97 for Q4 FY16. The Company’s FY17 GAAP earnings per diluted share from continuing operations were $23.28, up 137% compared to $9.84 a year ago same period. McKesson’s Q4 FY17 and FY17 GAAP earnings included a pre-tax net gain of $3.9 billion, or $14.10 and $13.53 per diluted share, respectively, related to the creation of the Change Healthcare joint venture, as reported on March 02, 2017.

For Q4 FY17 and FY17, GAAP and adjusted earnings included charges of $0.03 and $0.04 per diluted share, respectively, related to the Company’s cost alignment plan that was announced in March 2016. Excluding Cost Alignment Plan charges from adjusted earnings, McKesson’s reported quarter results of $3.42 per diluted share, were up 8% compared to $3.18 in the prior year. The Company’s earnings number surpassed Wall Street’s expectations of $3.39 per share.

Segment Results

During Q4 FY17, McKesson’s Distribution Solutions revenues were $48.2 billion, up 5% on a reported basis and 6% on a constant currency basis. For FY17, Distribution Solutions revenues were $195.9 billion, up 4% on a reported basis and 5% on a constant currency basis.

For the reported quarter, Distribution Solutions GAAP operating profit was $769 million and GAAP operating margin was 1.60%. On a constant currency basis, Q4 FY17 adjusted operating profit was $1.1 billion, up 10% on a y-o-y basis, while adjusted operating margin was 2.18%. For FY17, Distribution Solutions GAAP operating profit was $3.4 billion and GAAP operating margin was 1.72%. On a constant currency basis, the segment’s full-year adjusted operating profit was $3.9 billion, down 9% on a y-o-y basis, and adjusted operating margin totaled 1.99%.

For Q4 FY17, McKesson’s North America pharmaceutical distribution and services revenues totaled $40.6 billion, up 5% both on a reported and constant currency basis, primarily reflecting market growth and acquisitions, partially offset by branded to generic conversions. For FY17, the North America pharmaceutical distribution and services revenues recorded were $164.8 billion, up 4% on a reported and constant currency basis, compared to the prior year.

McKesson’s International pharmaceutical distribution and services revenues were $6.1 billion for Q4 FY17, up 5% on a reported basis and 12% on a constant currency basis, driven by acquisitions and market growth. For FY17, International pharmaceutical distribution and services revenues were $24.8 billion, up 6% on a reported basis and up 11% on a constant currency basis, compared to the prior year.

The Company’s Medical-Surgical distribution and services revenues were $1.6 billion for Q4 FY17, up 9%, driven by market growth and an acquisition. For FY17, Medical-Surgical distribution and services revenues were $6.2 billion, up 3% compared to the prior year.

During Q4 FY17, McKesson’s MTS revenues totaled $0.5 billion, down 30% both on a reported and constant currency basis. For FY17, MTS revenues of $2.6 billion declined 10% on a reported basis and 9% on a constant currency basis. For the reported quarter, MTS GAAP operating profit was $4.1 billion and full-year MTS GAAP operating profit was $4.2 billion, both driven by the recognition of a gain related to the creation of Change Healthcare. On a constant currency basis, the segment’s adjusted operating profit was $99 million, down 3% on a y-o-y basis, while adjusted operating margin was 19.30%. For FY17 MTS’ adjusted operating profit was $303 million on a constant currency basis, and the adjusted operating margin was 11.60%.

Cash Matters

For FY17, McKesson generated cash from operations of $4.7 billion, and ended the year with cash and cash equivalents of $2.8 billion. During the year, McKesson paid $4.2 billion for acquisitions, repurchased $2.3 billion of its common stock, repaid approximately $1.6 billion in long-term debt, invested $562 million internally, and paid $253 million in dividends.

On May 25, 2017, McKesson’s Board of Directors declared a regular dividend of $0.28 per share on Common Stock. The dividend will be payable on July 03, 2017, to stockholders of record on June 05, 2017.

Outlook

For the fiscal year ending March 31, 2018, McKesson expects GAAP earnings per diluted share to range in $7.10 to $8.80 and adjusted earnings per diluted share of $11.75 to $12.45. For the upcoming fiscal year, the Company’s income attributable to non-controlling interests is expected to increase approximately 200% on a y-o-y basis, driven primarily by the joint sourcing agreement with Walmart.

For FY18, McKesson’s cash flow from operations is expected to decline by approximately 10% on a y-o-y basis, primarily due to a very strong FY17 close as well as the loss of the majority of MTS’ cash flow following the creation of Change Healthcare.

Stock Performance

On Wednesday, June 07, 2017, the stock closed the trading session at $161.59, slightly down 0.22% from its previous closing price of $161.94. A total volume of 1.26 million shares have exchanged hands. McKesson’s stock price surged 14.71% in the last one month, 9.31% in the past three months, and 11.44% in the previous six months. Furthermore, since the start of the year, shares of the Company have rallied 15.05%. The stock is trading at a PE ratio of 6.76 and has a dividend yield of 0.69%. The stock currently has a market cap of $34.12 billion.

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