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Here's Why Investors Liked McKesson's Q3 Results

By Keith Speights - Feb 2, 2021 at 12:00PM

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The COVID-19 pandemic served as a tailwind for the big healthcare supply chain management company.

Some might view McKesson (MCK 1.02%) as a kind of boring company. Healthcare supply chain management isn't the most exciting business in the world. But McKesson's stock performance has been anything but boring. Its shares soared 26% in 2020 and are off to a good start this year.

The year-to-date performance was definitely helped by McKesson's latest financial results. The big healthcare company provided its fiscal year 2021 third-quarter update before the market opened on Tuesday. Shares rose in early trading. Here's why investors liked McKesson's Q3 results.

Two scientists in a lab.

Image source: Getty Images.

By the numbers

McKesson reported third-quarter revenue of $62.6 billion. This reflected a 6% increase from the prior-year period. It also topped the Wall Street consensus estimate of $61.73 billion.

The company reported a third-quarter net loss of $39.03 per share, based on generally accepted accounting principles (GAAP). In the prior-year period, McKesson generated GAAP earnings of $1.06 per share.

McKesson announced adjusted earnings of $4.60 per share in the third quarter. This figure was 21% higher than the company's adjusted earnings of $3.81 per share reported in the same quarter of 2020. And it blew past the average analyst adjusted earnings estimate of $4.11 per share.

Behind the numbers

Investors usually like revenue and earnings beats like what McKesson delivered in its fiscal 2021 third quarter. They also probably appreciate the underlying business strength those numbers represent.

McKesson's U.S. pharmaceutical segment revenue jumped 7% year over year to $49.5 billion. The company attributed this growth to overall market growth and higher specialty volumes. Brand-to-generic conversions, however, partially offset the revenue gain.

The big story, though, came from the company's medical-surgical solutions segment. Revenue for the segment soared 43% year over year in Q3 to $3.1 billion. Surging demand for COVID-19 tests served as the primary catalyst for this growth.

McKesson's prescription technology solutions segment made $777 million in the third quarter, up 9% year over year. The company said this solid increase stemmed from new brand support programs as well as higher volumes of existing brand support programs.

The only negative for McKesson in its fiscal Q3 came from the international segment. Revenue for the segment fell 6% year over year to $9.3 billion. However, the company stated that the main reason for this decline was the contribution of its German wholesale business that's part of a joint venture with Walgreens Boots Alliance. McKesson's pain was Walgreens' gain. The pharmacy giant showed it has benefited from this joint venture in its most recent quarterly update.

Looking ahead

Another reason why investors liked McKesson's Q3 update and why the healthcare stock jumped on Tuesday was the company's guidance. McKesson now projects adjusted earnings per share (EPS) for full-year fiscal 2021 will between $16.95 and $17.25. That's up from its previous forecast of a range of $16.00 to $16.50. 

McKesson CEO Brian Tyler said that this improved outlook stems in large part from "the successful execution of distributing COVID-19 vaccines and ancillary supplies in the U.S." With millions more vaccine doses on the way, McKesson's near-term future doesn't appear to be boring at all.

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Stocks Mentioned

McKesson Corporation Stock Quote
McKesson Corporation
MCK
$329.53 (1.02%) $3.32
Walgreens Boots Alliance, Inc. Stock Quote
Walgreens Boots Alliance, Inc.
WBA
$38.56 (1.74%) $0.66

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