Tuesday, July 28, 2009

McKesson beats handily (MCK)

AlphaNinja - Thanks to strict cost controls, healthcare distributor McKesson (MCK) beat earnings this afternoon, reporting profits of $1.06 per share, versus expectations of 83cents.

Details from the release:

"In the first quarter, Distribution Solutions gross profit of $954 million improved 2% compared to the first quarter a year ago. The increase in gross profit for the quarter was due primarily to the impact of our agreements with branded pharmaceutical manufacturers and an improved mix of higher-margin products and services, including sales of OneStop Generics, which were up 19% in the quarter, partially offset by lower sell margin in our U.S. pharmaceutical business.

Distribution Solutions operating profit of $430 million was up 12% for the quarter and operating margin was 1.66% compared to 1.48% a year ago.

“Distribution Solutions had a very strong performance in the first quarter. Margin improvements were attributable to several factors, including solid levels of compensation from our agreements with branded pharmaceutical manufacturers, above-market growth for our OneStop Generics program, increased demand related to the H1N1 virus and, most importantly, a more disciplined approach to expense management across all of the businesses in this segment,” said Hammergren."

Full year guidance was raised to $4.15-4.30 per share, the midpoint of which assumes that we don't see the same kind of earnings beats in the quarters ahead -->>McKesson might be conservative in its estimates.

Using the midpoint of earnings guidance for 2010 implies Free Cash Flow in the $1.2billion range, which is a 12% FCFY on the company's net-of-cash market value. A very nice yield for this company's shares.

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