McKesson Posts Strong First Quarter With Revised Guidance; Slightly Raising Fair Value Estimate

Narrow-moat McKesson posted strong fiscal first-quarter results driven by organic growth in the United States, in contrast with performance in the international segment that reflects management’s goal to wind down the European distribution business to reallocate capital toward specific higher-margin U.S. operations. As the company nears divestment from Europe, it was coincidentally less exposed to the negative translation effects of the strong dollar on this quarter relative to peers. Looking to the year ahead, McKesson’s vaccine and test kit distribution contracts with the U.S. government were recently extended through early to mid-2023. Because of this extension, management raised its earnings per share guidance for fiscal 2023 to $23.95-$24.65 from $22.90-$23.60, and we plan to slightly raise our fair value estimate as a result.