Summary:
McKesson reported fiscal second-quarter 2015 (ended Sep 30, 2014) earnings of $2.79 per share, comfortably beating the Zacks Consensus Estimate of $2.74 and up from the year-ago earnings of $2.30 per share. Revenues soared 35.7% to $44.8 billion in the reported quarter, surpassing the Zacks Consensus Estimate of $42.9 billion. We are impressed by the fiscal second-quarter beat. McKesson has been actively pursuing deals and acquisitions to drive growth as a history of such acquisitions. Its relentless efforts to acquire Celesio were commendable. We believe that the Celesio acquisition is a positive step, which will strengthen McKesson's foothold in Europe, thereby geographically expanding its core operations further. We have thus maintained our Neutral recommendation.
Overview:
San Francisco, CA-based McKesson Corporation is a health care services and information technology company. The company delivers pharmaceuticals, medical supplies and health care information technologies to the health care industry. Through its operations, McKesson aims to not only reduce costs associated with the health care business but also to improve safety associated with the business. McKesson operates through two segments: Distribution Solutions and Technology Solutions.
The Distribution Solutions segment distributes ethical and proprietary drugs, medical-surgical supplies and equipment and health and beauty care products in North America. It also provides specialty pharmaceutical solutions for biotech and pharmaceutical manufacturers, sells pharmacy software apart from providing consulting, outsourcing and other services. The Distribution Solutions segment consists of the following sub-divisions: North America pharmaceutical distribution and services, International pharmaceutical distribution and services and Medical Surgical distribution and services. The segment also provides medical-surgical supply distribution, equipment, logistics and other services to healthcare providers through a network of distribution centers within the U.S. In fiscal 2014, McKesson decided to exit to minority investment in Nadro, a privately-held pharmaceutical distributor in Mexico, where the company has a 49% stake.
The Technology Solutions segment delivers enterprise-wide clinical, patient care, financial, supply chain, and strategic management software solutions, pharmacy automation for hospitals, as well as connectivity, outsourcing and other services. The segment consists of the following businesses McKesson Health Solutions, Connected Care and Analytics, Imaging and Workflow Solutions, Business Performance Services and Enterprise Information Solutions. The company's payer group of businesses, which include InterQual, clinical auditing and compliance, and medical management software businesses and care management programs, are also included in this segment. The segment's customers include hospitals, physicians, homecare providers, retail pharmacies and payers from North America, the UK and other European countries, and Asia Pacific. In fiscal 2014, McKesson decided to realign its structure in the Technology Solutions segment and sell its International Technology and Hospital Automation business to focus on its core competencies. During the third quarter of 2014, McKesson sold its Hospital Automation business.