McKesson Corporation MCK is well-poised for growth in the coming quarters, courtesy of its strong Biologics business. The optimism, led by a decent first-quarter fiscal 2025 performance and improving demand for healthcare, is expected to contribute further. However, stiff competition and weaker generic pharmaceutical pricing trends persist.

In the past year, MCK’s shares have risen 25.6% compared with the industry’s growth of 3.5%. The S&P 500 has gained 28.3% in the same time frame.

The renowned healthcare services and information technology company has a market capitalization of $72.36 billion. The company projects 14.1% growth for the next five years and expects to witness continued improvements in its business. McKesson’s earnings surpassed the Zacks Consensus Estimate in three of the trailing four quarters and missed the same once, delivering an earnings surprise of 4.99%, on average.

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Reasons Favoring McKesson’s Growth

Improving Demand for Healthcare: Following significant market disruption in the past three years due to COVID-19, the medical sector is witnessing improving demand across several verticals, especially surgeries. McKesson also benefits from the recovery in demand for healthcare products, which is driving volumes. Moreover, improving prices of products boost sales.

McKesson's distribution business will continue to benefit from a higher volume of specialty products, including an increase in volume from retail national account customers. Rising demand for extended and primary care should drive the top line for the Medical-Surgical business in fiscal 2025. Moreover, improving demand for healthcare-related technologies and a rise in prescriptions from third-party logistics should drive revenues from the Prescription Technology Solutions segment.

Acquisitions & Strategic Collaborations: McKesson continues to actively pursue deals, divestitures and acquisitions to drive growth. In August, the company inked a definitive agreement to acquire a controlling interest (representing approximately 70% ownership). Following the completion of the transaction, Core Ventures will be part of the Oncology platform, and financial results will be reported within McKesson’s U.S. Pharmaceutical segment.

Last month, Ontada, a McKesson business, announced a strategic collaboration with Datavant, a health data platform, to include the former’s data in the latter’s health ecosystem. This collaboration aims to help life science companies quickly access Ontada’s real-world data.

In September, McKesson inked a deal to sell its Rexall and Well.ca businesses, both based in Canada, to Birch Hill Equity Partners, a Canadian private equity firm. The deal supports McKesson's strategic decision to expand its oncology and biopharma services while maintaining its focus on the Canadian healthcare market through distribution and biopharma.

Strong Q2 Results: McKesson recorded a significant uptick in its overall top line during the second quarter. This growth was primarily driven by the U.S. Pharmaceutical segment and continued momentum in the Pharmaceutical segment, especially for specialty products and GLP-1 medications. MCK also recorded increased prescription volumes during the quarter.

Revenues in the international segment increased year over year. This was due to higher pharmaceutical distribution volumes in the Canadian business. Revenues in the Medical-Surgical Solutions segment were primarily driven by higher volumes of specialty pharmaceuticals, including vaccines in the primary care channel.

On its second-quarter 2025 earnings call, McKesson raised its adjusted earnings per share (EPS) guidance for fiscal 2025. It now expects adjusted EPS to be in the range of $32.40-$33.00 (previously expected $31.75-$32.55), which indicates growth of 18-20% from the prior-year level. Revenues are expected to improve 15-17% from the prior-year figure.

Factors That May Offset the Gains for MCK

Fiscal Q2 Headwinds: In the fiscal second quarter of fiscal 2025, McKesson witnessed several headwinds that weighed on its results. The company saw a 50 basis point (bps) contraction in gross margin, which accounted for 3.5% of net revenues, down from the prior-year quarter’s level. Operating margin was 0.6%, down almost 60 bps year over year.

MCK has started taking initiatives to boost its operational efficiency and optimize costs; however, this will likely take a while to reflect in the company’s performance. Meanwhile, the decline in operating margin, reflecting higher costs and expenses, is likely to continue in the next quarter.

Stiff Competition: The Distribution Solutions segment faces stiff competition both in terms of price and service from various full-line, short-line, and specialty wholesalers, service merchandisers, self-warehousing chains, manufacturers engaged in direct distribution, third-party logistics companies and large-payer organizations. Moreover, the company depends on fewer suppliers for its products. As a result, it is not in a position to negotiate pricing.

Estimate Trend

McKesson has been witnessing a positive estimate revision trend for fiscal 2025. Over the past 30 days, the Zacks Consensus Estimate for its earnings per share has moved 0.6% north to $32.73.

The Zacks Consensus Estimate for third-quarter fiscal 2025 revenues is pegged at $95.46 billion, which indicates an 18% improvement from the year-ago reported number. The same for EPS was pinned at $8.35, implying an improvement of 7.9% year over year.

McKesson Corporation Price

McKesson Corporation price | McKesson Corporation Quote

Zacks Rank & Other Stocks to Consider

McKesson currently carries a Zacks Rank #2 (Buy).

Some other top-ranked stocks in the broader medical space are Masimo MASI, Accuray ARAY and Abbott Laboratories ABT.

Masimo, sporting a Zacks Rank #1 (Strong Buy) at present, has an estimated growth rate of 11.8% for 2025. You can see the complete list of today’s Zacks #1 Rank stocks here.

MASI’s earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 17.10%. Its shares have risen 51.2% compared with the industry’s 5.2% growth year to date.

Accuray, carrying a Zacks Rank #2 at present, has an estimated growth rate of 1200% for 2025. Its earnings missed estimates in three of the trailing four quarters and met in one, delivering an average negative surprise of 141.97%.

ARAY’s shares have lost 31.1% against the industry’s 5.2% growth year to date.

Abbott, carrying a Zacks Rank of 2 at present, has an estimated earnings growth rate of 10% for 2025. It delivered a trailing four-quarter average earnings surprise of 1.64%.

ABT’s shares have risen 2.3% year to date compared with the industry’s 11.5% growth.

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