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How McKesson Beat Wall Street Estimates in Q4

By Keith Speights – May 20, 2020 at 3:00PM

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The healthcare giant delivered across-the-board sales growth despite COVID-19 headwinds.

McKesson (MCK -0.41%) wasn't immune to the impact of the novel coronavirus. Its shares plunged more than 30% at one point during the massive market sell-off in March fueled by the COVID-19 pandemic. However, McKesson has regained around half of its decline so far. And the stock could now gain even more upward momentum.

The healthcare giant announced its fiscal 2020 fourth-quarter and full-year results on Wednesday before the market opened. Here are the highlights from McKesson's Q4 update.

Male healthcare provider standing with his arms crossed, smiling. One male and two female healthcare workers are in the background.

Image Source: Getty Images.

By the numbers

McKesson reported revenue of $58.5 billion in its fiscal 2020 fourth quarter, which ended on March 31, 2020. This reflected a 12% year-over-year increase. It also topped the average analysts' revenue estimate of $55.58 billion.

The company announced Q4 net income of $1.1 billion, or $5.82 per share, based on generally accepted accounting principles (GAAP). This was a move in the right direction from the GAAP loss of $744 million, or $4.17 per share, reported in the same quarter of 2019. 

On a non-GAAP adjusted basis, McKesson's net income in the fourth quarter was $4.27 per share. This reflected a 16% increase from the prior-year period adjusted net income of $3.69 per share. It also handily beat the consensus Wall Street adjusted earnings estimate of $4.08 per share.

Behind the numbers

McKesson makes most of its revenue from its U.S. pharmaceutical and specialty solutions segment. The good news for the company was this segment performed really well in the fourth quarter, with revenue up 13% year over year to $46.3 billion. This growth stemmed primarily from price increases for brand drugs and higher volumes from retail national account customers. 

The company's European pharmaceutical solutions segment also turned in a solid performance in Q4. Sales rose 6% on a reported basis to $7.2 billion. On a constant-currency basis, the segment's year-over-year revenue growth was 9%.

A stronger flu season helped drive higher sales for McKesson's medical-surgical solutions segment in the fourth quarter. Revenue for the segment totaled $2.2 billion, a 13% year-over-year increase.

McKesson's GAAP bottom line was boosted by a $414 million after-tax gain from the separation of the company's investment in Change Healthcare. Its adjusted earnings-per-share growth also benefited from a lower share count.

Looking ahead

Many companies in the healthcare sector have withdrawn their full-year guidance or opted to not provide any guidance. McKesson is an exception. The company said that it expects full-year fiscal 2021 adjusted earnings per diluted share to be between $13.95 and $14.75. This outlook reflects some headwinds from the COVID-19 pandemic, particularly in the first half of the fiscal year.

McKesson CEO Brian Tyler stated, "Despite the uncertainties in the near-term macro environment, we remain confident in the resiliency of our business model and committed to creating long-term shareholder value."

Keith Speights has no position in any of the stocks mentioned. The Motley Fool recommends McKesson. The Motley Fool has a disclosure policy.

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