Analyst Allen Lutz from Bank of America Securities maintained a Buy rating on McKesson (MCK – Research Report) and keeping the price target at $566.00.
Allen Lutz has given his Buy rating due to a combination of factors surrounding McKesson’s recent developments and financial forecasts. The catalyst for the positive outlook is McKesson’s acquisition of the OptumRx contract, which is set to commence in July 2024. This new contract is estimated to bring in approximately $33 billion in revenue, potentially adding $75-$125 million to operating profit, and enhancing earnings per share by $0.45-$0.77. This gain is significant as it represents a notable addition to McKesson’s EBIT, particularly within the U.S. Pharmaceutical segment.
Furthermore, this new contract is expected to support a growth rate in Fiscal Year 2025 that surpasses the long-term target of 5-7% for U.S. Pharmaceutical EBIT growth, even when excluding potential one-time start-up costs. With this additional revenue stream, there is increased confidence that McKesson will exceed the Street’s earnings per share estimates for FY25. Additionally, the report indicates that investor expectations are already anticipating an EPS guide between $31.00-$31.50 for the initial FY25. Despite competitive risks, Lutz’s rating reflects optimism in McKesson’s financial trajectory and the strategic benefit of the OptumRx contract win.
According to TipRanks, Lutz is an analyst with an average return of -6.1% and a 47.73% success rate. Lutz covers the Healthcare sector, focusing on stocks such as Teladoc, Healthequity, and Cencora.
In another report released on April 15, Morgan Stanley also maintained a Buy rating on the stock with a $548.00 price target.
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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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