Yahoo Finance McKesson Corp (MCK) Q4 2024 Earnings Call Transcript Highlights: Strong Growth and Strategic ...
Consolidated Revenue: Grew 12% to $309 billion.
Adjusted Earnings Per Diluted Share: Increased by 6% to $27.44.
U.S. Oncology Network: Expanded to approximately 2,600 providers at 600 sites across 31 states.
Prescription Technology Segment: Adjusted operating profit grew by 23%.
U.S. Pharmaceuticals: Revenue up 16%, adjusted operating profit increased by 7%.
Fourth Quarter Revenue: Increased 11% to $76.4 billion.
Fourth Quarter Gross Profit: $3.3 billion, up 7%.
Fourth Quarter Net Income: Earnings per diluted share was $6.18.
Free Cash Flow: Generated $3.6 billion for the fiscal year.
Share Repurchases: $3 billion at an average price of approximately $436 per share.
Release Date: May 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
McKesson Corp (NYSE:MCK) reported a 12% increase in consolidated revenue to $309 billion and a 6% increase in adjusted earnings per share to $27.44, both surpassing initial expectations for fiscal 2024.
The company saw significant expansion in its U.S. oncology network and strong market demand for its access, affordability, and adherence solutions, highlighting growth in strategic areas.
McKesson Corp (NYSE:MCK) achieved substantial growth in its Prescription Technology segment, with a 23% increase in adjusted operating profit, driven by high demand for its innovative solutions that saved patients over $8.8 billion on medications.
The company successfully expanded its biopharma services platform through strategic investments and acquisitions, enhancing its capabilities and market position.
McKesson Corp (NYSE:MCK) has a robust financial position, with $3.6 billion in free cash flow generated in fiscal 2024, allowing for significant shareholder returns and continued investment in growth initiatives.
Negative Points
Operating expenses for McKesson Corp (NYSE:MCK) increased by 11% to $2.1 billion, driven by higher costs to support growth, which could impact profit margins if not managed effectively.
The company recorded a reserve for environmental matters which impacted the corporate segment, indicating potential liabilities related to past business activities.
Despite overall growth, the Prescription Technology Solutions segment saw flat revenues year-over-year, with challenges in the third-party logistics business offsetting gains in other areas.
McKesson Corp (NYSE:MCK) faces ongoing competitive pressures in the pharmaceutical distribution and services market, requiring continuous innovation and investment to maintain its market position.
The company anticipates some onboarding costs associated with the new Optum contract, which could affect short-term financial performance despite not being material.
Q & A Highlights
Q: How much of the pharma growth increase is related to Optum? Were there any onboarding costs associated with bringing a contract like that on board? A: (Britt J. Vitalone - Executive VP & CFO) The Optum contract is pharmaceutical-related only and is included in our guidance. Specific contributions from Optum have not been disclosed and are not planned to be disclosed going forward. There have not yet been any costs incurred related to the transition, but some are expected, though they are not material and are included in our guidance.
Q: Can you discuss the growth rate of the prior authorization business in RxTS, particularly in relation to GLP-1 medications? A: (Britt J. Vitalone - Executive VP & CFO) The prior authorization business, part of our access solutions, did see growth in the first quarter. Investments have been made for future growth. The underlying business grew 23% year-over-year, showing strong momentum.
Q: Regarding the pharmaceutical operating profit for 2025, what is propelling the growth beyond the long-term outlook of 5% to 7%, now at 8% to 10%? A: (Brian S. Tyler - CEO & Director) The growth is a reflection of the investments made over the past years and the efficiency of our core operations. The expanded relationship with Optum is a testament to our differentiated services and solutions.
Q: What is driving the increased optimism in the RxTS segment for fiscal 2025? A: (Britt J. Vitalone - Executive VP & CFO) The growth guide for FY '25 is consistent with the historical growth rate of the segment. Investments continue to be made to develop additional solutions and capabilities for customers, supporting stable prescription growth and ongoing value creation.
Q: Can you provide more details on the nature of the biopharma investments being made in the prescription transaction business? A: (Brian S. Tyler - CEO & Director) Investments have primarily been in technology to enhance the value and return our products provide to biopharma and to continue solving new problems for them. These investments are focused on innovation and developing new capabilities.
Q: How are you thinking about data use and assets with the new acquisition in the med surg segment? A: (Brian S. Tyler - CEO & Director) The acquisition of Compile is seen as a foundational data investment. It complements our extensive provider data service offering and is expected to unlock unique value due to our broad reach and relationships in the med surg segment.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
