McKesson (MCK -0.15%), a leading distributor of pharmaceuticals and provider of health information technology, reported its fiscal 2025 second-quarter results on Nov. 6. For the period, which ended Sept. 30, the company showcased solid growth, especially in its U.S. pharmaceutical segment, with total revenue climbing to $93.7 billion, a 21% year-over-year increase, exceeding analyst expectations. Adjusted earnings per diluted share (EPS) rose to $7.07, outperforming the analyst estimate of $6.88. However, net income decreased sharply to $241 million due to significant charges from its Canadian operation sale.
| Metric | Fiscal Q2 2025 Result | Fiscal Q2 2025 Analyst Estimate | Fiscal Q2 2024 Result | % Change YOY |
|---|---|---|---|---|
| Adjusted EPS | $7.07 | $6.88 | $6.23 | 13% |
| Total revenue | $93.7 billion | - | $77.2 billion | 21% |
| Net income | $241 million | - | $664 million | (64%) |
| U.S. pharmaceutical revenue | $85.7 billion | - | $69.7 billion | 23% |
Source: Analyst estimates for the quarter provided by FactSet.
McKesson's Business Overview
McKesson's primary business is pharmaceutical distribution. It serves healthcare providers across various channels, including retail pharmacies and specialty healthcare providers. Recently, McKesson has focused on strengthening its U.S. pharmaceutical segment and enhancing its prescription technology solutions (RxTS) unit. Its growth depends heavily on strategic partnerships with large-scale clients such as CVS and Walmart.
The company also emphasizes the development of the RxTS segment, which integrates healthcare stakeholders to improve medication access and affordability. Key success factors include leveraging its comprehensive distribution network and maintaining robust compliance in a highly regulated sector.
Quarterly Highlights
During the fiscal 2025 second quarter, McKesson's U.S. pharmaceutical segment was a powerhouse, generating $85.7 billion in revenue, which was a 23% rise year over year. This growth was underpinned by increased prescription volumes, the introduction of new strategic partners, and heightened demand for specialty products and GLP-1 medications. The company also finalized partnerships with significant entities, solidifying its market position.
The RxTS division reported a revenue increase of 11% to $1.3 billion amid challenging market conditions, such as delays in new drug launches. It demonstrated resilient growth potential by helping to streamline medication access backed by strong industry relationships.
Its international segment achieved a 7% revenue increase to $3.7 billion. However, profitability was affected by strategic shifts, including the sale of the Rexall and Well.ca businesses. Meanwhile, the company's deal to acquire a controlling interest in Florida Cancer Specialists & Research Institute’s Core Ventures bolstered its oncology platform expansion.
Net income, however, witnessed a sharp decline to $241 million from $664 million, primarily due to a $643 million charge related to fair value remeasurement of the Canadian assets (Rexall and Well.ca) that McKesson is selling. In addition, a $227 million business rationalization charge impacted results significantly. Despite all of this, McKesson achieved free cash flow of $335 million for the first six months of its fiscal 2025.
Looking Ahead
McKesson offered an optimistic outlook, raising its fiscal 2025 adjusted EPS forecast to a range of $32.40 to $33, up from its prior guidance range of $31.75 to $32.55. This revision reflects confidence in ongoing revenue growth and operational efficiencies. The guidance factors in $0.53 from equity investment gains year to date.
Focus areas for McKesson remain the oncology sector, enhancing the RxTS segment, and further modernizing operations. In the coming quarters, the company's ability to unwind from its strategic repositioning and harness synergies from recent acquisitions will be critical. Ongoing partnerships and its digitization strategy are expected to drive growth and secure McKesson's market leadership.
