On Thursday, TD Cowen expressed continued confidence in McKesson Corporation (NYSE:MCK), maintaining a Buy rating and a $652.00 price target on the stock. The firm's stance comes after McKesson's forecast for second-quarter earnings per share (EPS) fell short of consensus expectations. McKesson predicted its EPS would be between $6.70 and $7.00, which is below the anticipated $7.39.
Despite the lower-than-expected quarterly guidance, TD Cowen believes the market's reaction to the news—where shares dropped by 10%—was excessive. The firm points out that McKesson's full-year fiscal 2025 guidance remains unchanged. TD Cowen highlights that the most significant factor affecting the second quarter is a tax-related item, which they consider to be a transient issue.
The analysis by TD Cowen estimates that McKesson's adjusted operating income (AOI) growth year-over-year for the second quarter is reduced by only 212 basis points, maintaining a healthy growth rate of 7.6%. Furthermore, the firm anticipates that the growth rate for adjusted operating income will increase more steeply in the second half of the year by approximately 100 basis points.
In summary, TD Cowen's commentary suggests that the recent decline in McKesson's share price may present an opportunity for investors to purchase shares.
The firm's reiteration of the Buy rating and price target is based on the expectation of continued growth and the belief that the impact of the tax-related item on the second-quarter financials does not detract from the company's positive long-term outlook.
In other recent news, McKesson Corp has been making strategic moves in the healthcare industry. BofA Securities maintains a Buy rating on McKesson, following the company's decision to invest in the rapidly growing oncology and biopharma sectors.
This decision is backed by the recent acquisition of Florida Cancer Specialists, adding an estimated $3.6 billion in oncology spending to McKesson's platform. McKesson also recently acquired a controlling interest in Core Ventures, valued at $2.49 billion, which is expected to consolidate Florida Cancer Specialists' procurement operations.
In terms of financial performance, McKesson reported robust first-quarter revenues for fiscal 2025 of $79.3 billion, a 6% increase from the previous year. The company's adjusted earnings per diluted share rose by 8% to $7.88, leading to an updated full-year guidance. McKesson also announced a 15% increase in its quarterly dividend and approved an additional $4 billion for share repurchases.
TD Cowen analysts suggest that the Core Ventures transaction could positively impact McKesson's adjusted earnings per share, potentially increasing it by about 1% for the fiscal year 2025 and 2% for the fiscal year 2026.
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