Q1 2027 McKesson Corp Earnings Call Transcript
Key Points
- Strong fiscal Q1 2026 results with revenues up 8% to $105 billion and adjusted EPS up 20% to $9.93, exceeding expectations.
- Raised full-year adjusted EPS guidance to $44.20-$45.00, reflecting confidence in continued momentum.
- Three segments (North American Pharmaceutical, Oncology and Multispecialty, Prescription Technology Solutions) delivered double-digit operating profit growth.
- Oncology and Multispecialty segment saw 33% revenue growth, with organic growth of 24% excluding Core Ventures acquisition.
- Completed strategic separation actions for Medical-Surgical Solutions, including Apollo minority investment and $2.25 billion Term Loan B, positioning for standalone growth.
- Returned $2.6 billion to shareholders in Q1, including $2.5 billion in share repurchases, and increased dividend by 15%.
- Strong GLP-1 revenue growth of 24% year-over-year, driven by both cash and coverage markets.
- Continued investment in AI and technology, with examples of rapid deployment and operational efficiencies.
- Solid free cash flow on a trailing twelve-month basis of approximately $6.1 billion, providing financial flexibility.
- New CFO Kenny Cheung brings extensive experience and a focus on disciplined execution and capital allocation.
- Medical-Surgical Solutions segment operating profit decreased 20% due to product mix and one-time administrative expenses.
- Free cash flow was negative $372 million in Q1, though improved year-over-year, with full-year guidance of $4.5-$4.9 billion.
- Revenue growth in North American Pharmaceutical was partially offset by lower branded pharmaceutical pricing and branded-to-generic conversions.
- Interest expense increased to $75 million due to financing activities supporting the MedSurg separation.
- Effective tax rate guidance increased slightly to 18%-19% due to higher operating profit growth.
- Potential policy risks include 340B reform and IRA Part D implementation, which could impact the business.
- Q2 fiscal 2027 will face a tough comparison with a $51 million gain from the sale of an equity investment in the US oncology network in the prior year.
- Operating expenses increased 10% due to investments, though partially offset by operating leverage.
- The company anticipates accelerated investments in the second half of fiscal 2027, which may pressure near-term margins.
- The MedSurg separation involves ongoing costs and complexity, including noncash accounting adjustments.
(audio in progress) during this webcast, including a reconciliation of those measures to GAAP results can be found in today's earnings release and presentation slides. The presentation slides also include a summary of our results for the quarter and guidance assumptions.
With that, let me turn it over to Brian.
Good afternoon, everyone, and thank you for joining our call. Earlier today, we reported strong fiscal first quarter results, reflecting broad-based momentum across the enterprise and the disciplined execution of our teams.
Revenues increased 8% to $105 billion and adjusted earnings per diluted share increased 20% to $9.93, both results exceeding our expectations. During the quarter, three of our reporting segments delivered double-digit operating profit growth, reflecting the strength of our core operating businesses.
This performance is underpinned by good stable utilization and volume growth and is reinforced by our
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