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McKesson (MCK) Gains 26% YTD: What's Driving the Rally?

McKesson MCK is witnessing strong momentum, with its shares having rallied 26.3% year to date compared with 1.4% growth of the industry. The S&P 500 composite has risen 7% during the same time frame.

With healthy fundamentals and strong growth opportunities, this Zacks Rank #3 (Hold) company appears to be a solid wealth creator for its investors at the moment.

Headquartered in San Francisco, CA, McKesson is a healthcare services and information technology company with two operating segments — Distribution Solutions and Technology Solutions. The first segment distributes branded and generic pharmaceutical drugs, along with other healthcare-related products, on a global basis. It also provides practice management, technology, clinical support and business solutions. The second segment provides enterprise-wide clinical, patient care, financial, supply-chain and strategic management software solutions.

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Zacks Investment Research


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Catalysts Driving Growth

The rally in the company’s share price can be attributed to the strength in its robust Biologics business. The optimism, led by a solid fourth-quarter performance and improving demand for healthcare, is expected to contribute further.

Investors are also positive about McKesson’s robust Biologics business. Independent specialty pharmacy, Biologics by McKesson, has been making impressive progress lately. In April, Day One Biopharmaceuticals selected it as a specialty pharmacy provider for OJEMDA (tovorafenib), which has been approved for the treatment of pediatric low-grade glioma.

The company recorded a robust uptick in its overall top line during the fourth quarter. The uptick in revenues was primarily driven by growth in the U.S. Pharmaceutical segment, resulting from increased prescription volumes, including higher volumes from specialty products, retail national account customers and GLP-1 medications.

McKesson has been benefiting from improving demand across several verticals, especially surgeries, within the medical sector, following significant market disruption in the past three years due to COVID-19. The company is also benefiting from a recovery in demand-driving volumes.

Moreover, the improving prices of products are boosting sales. Meanwhile, MCK launched Project Oasis in April, an initiative aimed at advancing health equity for at-risk populations in underserved communities. Rising demand for extended and primary care is expected to drive the top line of the Medical-Surgical business in fiscal 2025.

However, the Distribution Solutions segment has experienced weaker generic pharmaceutical pricing trends, likely to be partially offset by improving volumes.

McKesson Corporation Price

McKesson Corporation Price
McKesson Corporation Price

McKesson Corporation price | McKesson Corporation Quote

Stocks to Consider

Some better-ranked stocks in the broader medical space that have announced quarterly results are Haemonetics HAE, Ecolab ECL and Boston Scientific Corporation BSX.

Haemonetics, currently sporting a Zacks Rank #1 (Strong Buy), reported fourth-quarter fiscal 2024 adjusted earnings per share (EPS) of 90 cents, which beat the Zacks Consensus Estimate by 2.3%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Haemonetics’ shares have risen 0.5% year to date compared with the industry’s 4% growth. It has a long-term growth rate of 12%. HAE’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 13.24%.

Ecolab, carrying a Zacks Rank #2 (Buy) at present, reported first-quarter 2024 adjusted EPS of $1.34, which beat the Zacks Consensus Estimate by 0.75%. Ecolab’s shares have risen 21.9% year to date against the industry’s 19.9% decline.

ECL has a long-term growth rate of 14.3%. Its earnings surpassed estimates in each of the trailing four quarters, the average surprise being 1.30%.

Boston Scientific reported first-quarter 2024 adjusted EPS of 56 cents, which beat the Zacks Consensus Estimate by 9.8%. The company currently carries a Zacks Rank #2. Boston Scientific’s shares have risen 33.9% year to date compared with the industry’s 4.1% growth.

BSX has a long-term growth rate of 12.5%. Its earnings surpassed estimates in each of the trailing four quarters, the average surprise being 7.49%.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Boston Scientific Corporation (BSX) : Free Stock Analysis Report

Ecolab Inc. (ECL) : Free Stock Analysis Report

McKesson Corporation (MCK) : Free Stock Analysis Report

Haemonetics Corporation (HAE) : Free Stock Analysis Report

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