- Revenue: $79.3 billion, reflecting 6% growth year-over-year.
- Adjusted Earnings per Diluted Share: Increased 8% to $7.88.
- Full Year Adjusted EPS Guidance: Raised to a range of $31.75 to $32.55.
- Quarterly Dividend: Increased by 15% to $0.71 per share.
- Share Repurchase Authorization: Increased by $4 billion, bringing the total to approximately $10 billion.
- US Pharmaceutical Segment Revenue: $71.7 billion, an increase of 7%.
- US Pharmaceutical Segment Operating Profit: Increased 6% to $815 million.
- GLP-1 Medications Revenue: $8.8 billion, an increase of 26% year-over-year.
- Prescription Technology Solutions Revenue: $1.2 billion, flat year-over-year.
- Prescription Technology Solutions Operating Profit: $223 million, flat year-over-year.
- Medical-Surgical Solutions Revenue: $2.6 billion, an increase of 1%.
- Medical-Surgical Solutions Operating Profit: $200 million, a decrease of 15%.
- International Segment Revenue: $3.7 billion, an increase of 6%.
- International Segment Operating Profit: $102 million, an increase of 13%.
- Gross Profit: $3.1 billion, an increase of 4%.
- Operating Expenses: Increased 7% to $1.9 billion.
- Operating Profit: $1.3 billion, an increase of 12%.
- Interest Expense: $70 million.
- Effective Tax Rate: 13%.
- Free Cash Flow: Negative $1.5 billion.
- Capital Expenditures: $167 million.
- Cash and Cash Equivalents: $2.3 billion.
- Share Repurchases: $527 million.
- Dividend Payments: $82 million.
Release Date: August 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- McKesson Corp (MCK, Financial) reported first quarter revenues of $79.3 billion, reflecting a 6% growth year-over-year.
- Adjusted earnings per diluted share increased 8% to $7.88, exceeding original expectations.
- The company raised its full-year adjusted earnings per diluted share guidance to a new range of $31.75 to $32.55.
- The Board of Directors approved a 15% increase to the quarterly dividend and additional share repurchase authorization of up to $4 billion.
- Strong performance in the US pharmaceutical segment, driven by growth in specialty pharmaceuticals and oncology platforms.
Negative Points
- Medical-surgical segment experienced slower growth than anticipated, resulting in a year-over-year decline for the first quarter.
- Prescription technology solutions segment's adjusted operating profit was unchanged from the prior year due to higher expenses and lower contributions from access programs.
- Operating expenses increased by 7% to $1.9 billion, primarily to support growth in the US pharmaceutical segment.
- The company faced headwinds in the primary care channels, impacting the medical-surgical segment's performance.
- Product launch delays and supply shortages affected the prescription technology solutions segment's revenue growth.
Q & A Highlights
Q: Can you help us understand the mix of services within access and the impact of GLP-1 mix?
A: Each access program can have different transactions and interactions with patients, which can shift unexpectedly. Regarding GLP-1, utilization has been stable and growing, but product delays and the maturity of products can impact the mix of services and programs. (Brian Tyler, CEO; Britt Vitalone, CFO)
Q: What factors will drive US pharma segment profit growth to the 8%-10% guidance range?
A: The first quarter performance was in line with expectations, driven by growth in specialty and oncology. Continued growth in these areas and strength in our generics program will drive profit growth. The impact of lower contributions from branded pharmaceuticals, specifically Humira, is the main change in revenue outlook. (Britt Vitalone, CFO)
Q: What is happening in the med-surg business, and what actions are being taken?
A: The demand for COVID-related products has significantly decreased, impacting the primary care channel. We are aligning our go-to-market strategies and operations to respond to market conditions and drive operational efficiencies. (Brian Tyler, CEO; Britt Vitalone, CFO)
Q: Can you provide more color on the activities to improve profitability in med-surg?
A: We are focusing on aligning our organization to meet changing customer demands, driving sustainable efficiency through our cost structure, and reengineering our real estate portfolio. These actions will drive significant benefits starting in the second half of the year. (Brian Tyler, CEO; Britt Vitalone, CFO)
Q: How did the formulary change with Humira impact gross profit?
A: The primary driver was the growth rate and trajectory for GLP-1 medications, which saw higher sequential growth than anticipated. Gross profit was generally in line with expectations, with the higher growth in GLP-1 distribution transactions being the main factor. (Britt Vitalone, CFO)
Q: What gives you confidence in the full-year outlook for prescription technology solutions despite product launch delays?
A: We have a broad portfolio of services beyond prior authorizations, including hub and reimbursement programs and affordability solutions. The annual verification program in the fourth fiscal quarter has been successful, and we believe the moderate adjustment to guidance is appropriate. (Britt Vitalone, CFO)
Q: Is there an opportunity to improve buy-side economics for GLP-1 medications as they become more widely available?
A: We are in ongoing discussions with manufacturers to get fair value for our services and support access and availability. We provide additional services through our technology solutions businesses to support manufacturers and improve patient access. (Brian Tyler, CEO)
Q: How does the changing market mix impact ClarusOne, and what new services can it bring?
A: ClarusOne positions us well for competitive low costs and availability of supply. We believe there is an opportunity to expand services, and we are focused on serving our customers' generic needs. (Britt Vitalone, CFO)
Q: What is your appetite for similar deals to the Tennessee cancer specialists, and will you provide more disclosure on the oncology offering?
A: We continue to expand the US oncology network through acquisitions and managed agreements. Bringing oncology-related assets under coordinated leadership will accelerate growth and focus. We will continue to invest in expanding the network as a key part of our growth strategy. (Brian Tyler, CEO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
