In a report released on May 8, Ann Hynes from Mizuho Securities maintained a Hold rating on McKesson (MCK – Research Report), with a price target of $540.00.
Ann Hynes’s rating is based on a nuanced assessment of McKesson’s recent financial performance and future outlook. While McKesson’s adjusted earnings per share (EPS) for the fourth quarter of fiscal year 2024 were lower than expected, the company did provide a robust forecast for fiscal year 2025. The growth projections for its U.S. Pharmaceutical and Prescription Technology Solutions (RxTS) segments are encouraging, surpassing long-term targets. However, the gains in the distribution business are primarily attributed to a new contract with Optum, which is known to have a comparatively lower margin. This blend of a solid future outlook tempered by a quarter that didn’t meet expectations leads to a Hold rating.
Moreover, Hynes considers the valuation metrics and how they compare with historical standards. McKesson is currently trading at a premium compared to historical averages of the distributor group, indicating a potentially stretched valuation. Despite raising the EPS estimates for the coming years, the valuation remains a concern, especially when considering the high trading multiples relative to earnings estimates for the current and next fiscal year. Therefore, the decision to maintain the price target and issue a Hold rating reflects a cautious stance, acknowledging the company’s positive elements while remaining wary of valuation levels that are higher than the norm for the industry.
In another report released on May 8, Wells Fargo also maintained a Hold rating on the stock with a $551.00 price target.
MCK’s price has also changed moderately for the past six months – from $460.670 to $543.610, which is a 18.00% increase.
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McKesson (MCK) Company Description:
Incorporated in 1833, Texas-based McKesson Corp. provides pharmaceuticals, health information technology, medical supplies, and care management tools. The company operates through four segments: U.S. Pharmaceutical, Prescription Technology Solutions, International, and Medical-Surgical Solutions.
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