On Thursday, Mizuho Securities adjusted its outlook on McKesson Corporation (NYSE:MCK) stock, increasing the price target to $570 from $540, while maintaining a Neutral rating.
The adjustment follows McKesson's first-quarter earnings report for fiscal year 2025, which included a 10% adjusted earnings per share (EPS) beat against consensus.
The beat was attributed to a non-operating gain from equity investments. Excluding this gain, the company's performance fell short in terms of revenue, adjusted operating income, and EPS.
The non-operating gain significantly impacted McKesson's financials, adding approximately $0.89 to the adjusted EPS, which otherwise would have fallen below consensus expectations by 3%.
Following the quarterly results, McKesson has increased its forecast for fiscal year 2025 adjusted EPS by $0.50 at the midpoint, a boost influenced by the aforementioned gain. Despite this increase, core EPS is estimated to have declined by $0.39.
In response to the latest financial outcomes, Mizuho has revised its fiscal year 2025 earnings estimate upward by $0.45, reflecting the impact of the non-operating gain.
The new price target of $570 is now based on calendar year 2025 projections, as opposed to the previous target, which was based on calendar year 2024. This change in valuation timeframe comes in the wake of McKesson's first-quarter results for the 2025 fiscal year.
In other recent news, McKesson Corporation has been the center of various analyst actions. Baird maintained an Outperform rating on McKesson and increased the share price target to $694, showing confidence in the company's ability to sustain growth.
This is despite McKesson's uneven fourth-quarter fiscal year 2023 report. McKesson's Rx Technology Solutions business and positive momentum in Specialty Prescription distribution were cited as key factors contributing to its premium valuation.
Meanwhile, Jefferies maintained a Hold rating on McKesson, adjusting the price target to $74 in line with the recently adjusted second-quarter organic growth forecast.
Argus also increased its price target on McKesson's stock to $670, maintaining a Buy rating, indicating confidence in the company's growth trajectory. TD Cowen has also raised its share price target for McKesson, citing a robust fiscal year 2025 outlook.
However, Jefferies has reduced the price target to $73, ahead of the company's anticipated second-quarter results, due to persistent challenges in McKesson's Flavor Solutions division and a price gap with private label options.
The company's strategic pricing management has led to a resurgence in consumer volume growth, and its initiatives to enhance its offerings with more value-added options are yielding positive results.
In legal developments, McKesson is among the companies implicated in the opioid crisis settlements exceeding $46 billion, with a legal fee pool of $2.13 billion set to reimburse law firms involved in the litigation.
Lastly, Congress member Carol Devine Miller has reported selling shares in several companies, including McKesson, in compliance with transparency requirements. These are the recent developments surrounding McKesson Corporation.
InvestingPro Insights
Following the recent earnings report and Mizuho Securities' updated price target for McKesson Corporation, it's worth considering additional insights from InvestingPro. McKesson's management has demonstrated confidence in the company's value through aggressive share buybacks, a practice that can indicate a belief in undervalued stock (InvestingPro Tip). Furthermore, the company has a strong track record of dividend reliability, having raised its dividend for 16 consecutive years and maintained payments for 31 years, which may appeal to income-focused investors (InvestingPro Tip).
The current market capitalization of McKesson stands at $80.1 billion, reflecting its substantial presence in the healthcare industry. With a P/E ratio of 27.43 and an adjusted P/E ratio for the last twelve months of Q4 2024 at 22.59, the company trades at a valuation that investors may find attractive given its revenue growth of 11.65% during the same period. Additionally, McKesson's revenue for the last twelve months as of Q4 2024 was a robust $308.95 billion, underscoring its prominent role in the Healthcare Providers & Services industry (InvestingPro Data).
For those interested in further analysis and metrics, InvestingPro offers additional tips on McKesson Corporation. These include insights into earnings revisions, stock volatility, gross profit margins, and the company's trading position relative to its 52-week high. For a deeper dive into McKesson's financial health and future prospects, visit https://www.investing.com/pro/MCK to discover the full range of InvestingPro Tips available.
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