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    MCK
    Earnings call· Jun 2025(Q1 FY26)

    MCKESSON Q1 FY26 earnings call MCK

    Aug 6, 2025 Source

    Executive summary

    McKesson Q1 FY26 — Strong Start, Raised FY26 Guidance, and Strategic Acquisitions

    McKesson delivered a strong Q1 FY26, driven by strategic acquisitions in oncology and ophthalmology, robust specialty and GLP-1 medication volumes, and ongoing automation investments. The company raised its full-year EPS guidance, reflecting confidence in its diversified healthcare services strategy and disciplined capital deployment, while navigating policy uncertainties and completing its European divestiture strategy.

    Highlights

    5

    • Consolidated revenues reached a record $97.8 billion, an increase of 23% over the prior year.

    • Adjusted operating profit increased 9% to $1.4 billion, with three segments delivering double-digit growth.

    • Full-year adjusted EPS guidance was raised to $37.10-$37.90 from $36.90-$37.70.

    • U.S. Pharmaceutical segment operating profit increased 17% to $950 million, driven by core distribution, oncology, and specialty products.

    • Prescription Technology Solutions operating profit increased 21% to $269 million, driven by higher demand for access solutions, including GLP-1 prior authorizations.

    Concerns

    2

    • A GAAP-only pretax provision for bad debts of $189 million ($140 million after tax) was recorded for Rite Aid.

    • International segment operating profit decreased 3% to $99 million, primarily due to the divestiture of Canada-based Rexall and Well.ca businesses.

    Guidance & targets

    19
    CategoryTargetConfidence
    Full-year adjusted EPS
    $37.10 to $37.90
    high materiality
    High
    Full-year revenue growth
    11% to 15%
    high materiality
    High
    Full-year operating profit growth
    9% to 13%
    high materiality
    High
    U.S. Pharmaceutical segment revenue growth
    12% to 16%
    medium materiality
    High
    U.S. Pharmaceutical segment operating profit growth
    high end of 12% to 16%
    medium materiality
    High
    Acquisitions contribution to U.S. Pharmaceutical segment operating profit growth
    approximately 6% to 7%
    medium materiality
    High
    Prescription Technology Solutions segment revenue growth
    8% to 12%
    medium materiality
    High
    Prescription Technology Solutions segment operating profit growth
    9% to 13%
    medium materiality
    High
    Medical-Surgical Solutions segment revenue and operating profit growth
    2% to 6%
    medium materiality
    High
    International segment revenue
    approximately a 2% decline to 2% growth
    medium materiality
    High
    International segment operating profit growth
    3% to 7%
    medium materiality
    High
    Corporate expenses
    $570 million to $630 million
    low materiality
    High
    Interest expense
    $260 million to $290 million
    low materiality
    High
    Income attributable to noncontrolling interest
    $215 million to $235 million
    low materiality
    High
    Full-year effective tax rate
    17% to 19%
    low materiality
    High
    Free cash flow
    $4.4 billion to $4.8 billion
    high materiality
    High
    Share repurchases
    $2.5 billion
    high materiality
    High
    Weighted average diluted shares outstanding
    124 million to 125 million
    low materiality
    High
    Quarterly dividend increase
    15%
    high materiality
    High

    Segment performance

    5
    SegmentRevenueYoYQoQMargin
    U.S. Pharmaceutical
    Driven by increased prescription volumes from retail national account customers, growth in the distribution of oncology and specialty products, and GLP-1 medications. Includes impact from strategic account onboarding.
    Operating profit growth: 17%GLP-1 revenues: $12.1 billion (up 38% YoY, 11% QoQ)Contributions from acquisitions (PRISM Vision, Core Ventures)
    		$90 billion25%—$950 million
    Prescription Technology Solutions
    Driven by increased Prescription volumes in the third-party logistics business and higher demand for access solutions.
    Operating profit growth: 21%Increased demand for access solutions, including prior authorization services for GLP-1 medications
    		$1.4 billion16%—$269 million
    Medical-Surgical Solutions
    Driven by higher volumes of Specialty Pharmaceuticals and operational efficiencies from cost optimization initiatives.
    Operating profit growth: 22%Operational efficiencies from cost optimization initiatives
    		$2.7 billion2%—$244 million
    International
    Impacted by the divestiture of Canada-based Rexall and Well.ca businesses, partially offset by higher pharmaceutical distribution volumes in the Canadian business.
    Operating profit growth: -3%Revenue growth excluding divested businesses: 5%Operating profit excluding divested businesses: flatDivestiture of Canada-based Rexall and Well.ca businessesHigher pharmaceutical distribution volumes in Canadian business
    		$3.7 billion1%—$99 million
    Corporate
    Corporate expenses were $138 million, with a decrease driven by lower opioid-related expense and technology costs, and lower McKesson Ventures gains compared to the prior year.
    McKesson Ventures equity investments gains: $1 million (compared to $110 million in Q1 FY25)Corporate expenses excluding McKesson Ventures gains: 4% lower YoYLower opioid-related expense and technology costs
    		———-$138 million

    Operational metrics

    26
    Adjusted operating profit
    $1.4 billion9% YoY
    Q1 FY26

    Reflects continued momentum across the enterprise.

    Consolidated revenues
    $97.8 billion23% YoY
    Q1 FY26

    Record consolidated revenues.

    Operating expense to gross profit ratio improvement
    450 bpsYoY
    Q1 FY26

    Driven by efficiency and operating leverage through disciplined focus and technology implementation.

    Interest expense
    $44 milliondecrease over prior year
    Q1 FY26

    Resulting from effective cash and portfolio management.

    Effective tax rate
    21.4%compared to 13% in prior year
    Q1 FY26

    Higher than prior year.

    Discrete tax benefit
    $23 millioncompared to $125 million in Q1 FY25
    Q1 FY26

    Lower discrete tax benefit compared to prior year.

    Diluted weighted average shares outstanding
    125.5 milliondecrease of 4%
    Q1 FY26

    Reflects share repurchase activity.

    Adjusted EPS
    $8.265% YoY
    Q1 FY26

    Driven by strong operational performance, partially offset by higher tax rate and lower McKesson Ventures gains.

    Adjusted EPS (ex-McKesson Ventures gains)
    14%YoY
    Q1 FY26

    Excluding the impact of gains related to McKesson Ventures equity investments.

    McKesson Ventures equity investments gains
    $1 millioncompared to $110 million in Q1 FY25
    Q1 FY26

    Lower gains from equity investments compared to prior year.

    GLP-1 revenues
    $12.1 billionup 38% YoY, 11% QoQ
    Q1 FY26

    Significant growth in GLP-1 medications.

    Cash and cash equivalents
    $2.4 billion
    Q1 FY26 end

    Balance at the end of the quarter.

    Capital expenditures
    $189 million
    Q1 FY26

    Part of free cash flow calculation.

    Cash used for acquisitions
    $3.4 billion
    Q1 FY26

    Used for PRISM Vision and Core Ventures acquisitions.

    Bond issuance
    $2 billion
    Q1 FY26

    Proceeds used to finance the Core Ventures acquisition.

    Cash returned to shareholders
    $671 million
    Q1 FY26

    Includes share repurchases and dividend payments.

    Share repurchases
    $581 million
    Q1 FY26

    Part of cash returned to shareholders.

    Dividend payments
    $90 million
    Q1 FY26

    Part of cash returned to shareholders.

    Cold chain lines growth
    nearly double-digitYoY
    Q1 FY26

    Reflects investments in cold chain capabilities to support growing demand for specialty therapies.

    U.S. Oncology Network providers
    approximately 3,300
    Q1 FY26

    Expanded with the integration of Florida Cancer Specialists.

    U.S. Oncology Network sites
    700
    Q1 FY26

    Expanded with the integration of Florida Cancer Specialists.

    U.S. Oncology Network states
    30
    Q1 FY26

    Expanded with the integration of Florida Cancer Specialists.

    Prescription Technology Solutions pharmacies connected
    over 50,000
    Q1 FY26

    Part of the robust scaled network.

    Prescription Technology Solutions providers connected
    approximately 985,000
    Q1 FY26

    Part of the robust scaled network.

    McKesson Foundation grants
    over 700
    past fiscal year

    Provided to employees experiencing various types of hardships.

    Rite Aid bad debt provision
    $189 million
    Q1 FY26

    Represents remaining trade accounts receivable balances due from Rite Aid prior to its second bankruptcy filing.

    Industry KPIs

    4
    MetricValueDetails
    Utilization trendssolid
    Pharmacy scripts specialtyincreased
    Segment revenue operating income12% to 16%%
    Adjusted EPS EBITDA leverage guidance$37.10 to $37.90USD

    Deals & partnerships

    4
    Core VenturesAcquisition of a controlling interest in Core Ventures, a business and administrative services organization established by Florida Cancer Specialists & Research Institute.

    Integrates Florida Cancer Specialists and its providers into the U.S. Oncology Network, expanding its footprint to approximately 3,300 providers across 700 sites in 30 states. Part of $3.4 billion cash used for acquisitions.

    PRISM Vision HoldingsAcquisition of a controlling interest in PRISM Vision Holdings, a premier provider of general ophthalmology and retina management services.

    Enables McKesson to develop a leading retina and ophthalmology platform and further enhance its practice management solutions. Part of $3.4 billion cash used for acquisitions.

    UndisclosedDefinitive agreement to sell retail and distribution businesses in Norway.

    Marks the final phase in McKesson's strategy of fully divesting its European businesses. Subject to customary closing conditions and regulatory approvals. Assets and liabilities will be classified as held for sale beginning Q2 FY26.

    InternalIntent to separate the Medical-Surgical segment into an independent company.

    McKesson has a strong track record of executing large complex transactions like spin-offs and divestitures. An update on progress is expected at the Investor Day in September.

    Risks & headwinds

    5
    GAAP-only provision for bad debts related to Rite Aid bankruptcyQ1 FY26

    $189 million pretax ($140 million after tax)

    Mitigation: Management stated the impact on operations and operating profit growth is immaterial for fiscal 2026.

    Variability in GLP-1 medication growthFY26

    Growth may vary from quarter-to-quarter

    Mitigation: Anticipated in guidance; company is well-positioned with access solutions.

    Non-linear revenue and operating profit trajectory in Prescription Technology SolutionsFY26

    Can vary from quarter-to-quarter

    Mitigation: Company has scale and breadth of capabilities to address market challenges; performance is underpinned by utilization, drug maturity, new launches, payer requirements, and investment timing.

    Uncertainty and volatility around pharmaceutical tariffsUncertain

    Economic impact would take 'a little while' to play out

    Mitigation: Tariff impacts are represented in current guidance; pharmaceutical supply chain typically has enough inventory to weather such periods.

    Potential policy changes impacting community care settings (MSN)Long time horizon

    Still very early, facts needed to assess impact; would likely increase overall healthcare costs if care shifts from community settings.

    Mitigation: Actively engaged with legislature, administration, manufacturers, and customers to advocate for maintaining vibrant community settings.

    What to watch in Q2 FY26

    5

    Medical-Surgical Segment Spin-off Progress

    September (Investor Day)
    CurrentAnnounced intent to separate
    TargetUpdate on progress

    Why it matters

    This strategic decision aims to unlock significant value and enhance operational focus for both companies.

    We look forward to providing an update on our progress at our upcoming Investor Day event in September.

    Q&A highlights

    5

    Given the strong Q1 RxTS results, should investors expect difficulty finding upside to the full-year guidance, and what factors could drive the upper end of the range, especially concerning GLP-1s and prior authorization initiatives?

    Management is pleased with the consistency of operating performance in RxTS, driven by utilization and program success. They believe continued investment in adjacencies will sustain long-term growth. Regarding prior authorization policies, things have been steady, with one payer preferring a different product, but overall prior authorization volumes remain good.

    “But from our perspective, as part of the benefit of having both programs is that drives prior auth Mix shift from 1 program sponsored to another, but our overall prior auth volumes remains good.”

    asked by Eric Percher · answered by Brian Tyler

    2 min read6 chapters

    Detailed Narrative

    01

    Strategic Acquisitions and Oncology Expansion

    McKesson completed the acquisition of a controlling interest in Core Ventures, integrating Florida Cancer Specialists into the U.S. Oncology Network. This expands the network's footprint to approximately 3,300 providers across 700 sites in 30 states. This move is expected to accelerate growth across the oncology platform by broadening distribution volume, GPO services, and enhancing patient care access within the community setting. The company also acquired a controlling interest in PRISM Vision to develop a leading retina and ophthalmology platform.

    02

    Biopharma Services and Prior Authorization

    The Prescription Technology Solutions segment delivered double-digit growth in revenue and adjusted operating profit. This performance was driven by increased demand for access and affordability solutions, particularly prior authorization services for GLP-1 medications. McKesson's robust network connects over 50,000 pharmacies and approximately 985,000 providers, enabling efficient commercialization solutions at scale and improving medication access for patients.

    03

    Automation and Operational Efficiency

    McKesson continues to strategically invest in automation across its pharmaceutical distribution network, implementing technologies like automated storage and retrieval systems and picking systems. Some distribution centers have achieved up to 90% automation, demonstrating throughput scalability and operational consistency. These advancements, including the new Olive Branch specialty distribution center equipped with mobile autonomous robots, are driving productivity, efficiency, order accuracy, and contributing to over 450 basis points of year-over-year improvement in the consolidated operating expense to gross profit ratio.

    04

    Portfolio Management and European Exit

    The company announced its intent to separate the Medical-Surgical segment into an independent company, a strategic decision aimed at unlocking significant value and enhancing operational focus for both entities. Furthermore, McKesson entered a definitive agreement to sell its retail and distribution businesses in Norway. This transaction marks the final phase of its strategy to fully divest European operations, with assets and liabilities to be classified as held for sale in Q2 FY26.

    05

    GLP-1 Medication Impact

    GLP-1 medications significantly contributed to the U.S. Pharmaceutical segment's performance, generating $12.1 billion in revenue in Q1 FY26. This represents a substantial increase of 38% year-over-year and 11% sequentially. Management anticipates continued growth in GLP-1s, acknowledging that this growth may vary quarter-to-quarter, but it remains a key driver for both distribution volumes and demand for prior authorization services within Prescription Technology Solutions.

    06

    Community Pharmacy Support

    McKesson emphasized its commitment to supporting community pharmacies, highlighting its annual IdeAShare conference and the success of its Health Mart franchise, which ranked highest in a J.D. Power 2025 U.S. pharmacy study. The company provides best-in-class services, innovation, advocacy, and tailored solutions to help these pharmacies navigate the dynamic industry environment and maintain their crucial presence in local communities.

    AI-generated summary of the company’s earnings call. Not investment advice.