McKesson Earnings: Raising the Fair Value on Strong Business Trends, Oncology Outlook, and Guidance

Narrow-moat McKesson reported fourth-quarter earnings that were in line with our expectations. Total sales were up 4.2% year over year, driven by strong domestic distribution business and prescription technology solutions. Management raised long-term segment profit growth targets for each of its segments, except international, 100 to 200 basis points as synergies from additional capabilities they have added to their businesses offset incremental costs. After baking in full-year results, time value of money, share repurchases, and raising certain assumptions based on a more favorable outlook of the company, we are raising our fair value estimate to $375 from $348.