After a good set of numbers for the first quarter, McKesson (MCK, Financial) hopes to continue its strong performance for the entire year. The company has various strategies up its sleeve that will strengthen its position in the long run. The drug distributor was planning to sell its International Technology business, which incorporates two divisions’ namely clinical and financial solutions, and workforce solutions. A few months back it sold its financial solutions.
Why McKesson is performing well
During the quarter McKesson performed quite well with year-over-year growth at various geographical locations. In fact the management cites that its U.S. pharmaceutical business exceeded its own expectations. Talking about numbers, it achieved a significant milestone with more than 3,400 Health Mart pharmacy members.
This was mainly driven by its recent drug launches for the treatment of Hepatitis C along with a solid growth across its independent national retail and mail order customers. And for the days ahead the company anticipates to do even better. McKesson continues to maintain its relationship with CVS Caremark and is also proceeding well in its agreement with Rite Aid. All these deals will help McKesson to curtail its distribution, while expanding its reach.
Also, once the Celesio deal is sought out it will further strengthen McKesson in the coming years. Apart from this its medical-surgical business is also progressing well even as the company acquires PSS World Medical. McKesson seems to be well positioned across all its distribution business and the management anticipates an even better outlook for the remaining fiscal.
The company is also pleased with its specialty business and prides in the diversity of its portfolio in this segment. According to John H.Hammergren, chaiman and CEO of McKesson, “We're excited about the progress we continue to make in our specialty business and believe we are well positioned to continue to grow and innovate in this dynamic market.”
Challenges and conclusion
But the company is facing some challenges in its technology solution, which was down 8% during the quarter. This was led by revenue softness in its Horizon Clinical software platform and the disposition of its product line. But the company continues to make steady progress in this segment and is focused to help its customers reduce cost, while operating more efficiently. It is also aimed to provide its customers with solutions to drive improved analytics that will support its customers' transform into a world of value-based care.
Going forward, the company seems to be well positioned for growth and has a strong balance sheet. Its guidance for the entire year remains unchanged with cash flow from operations of around $3 billion. The shares rose considerably in the past one year and looking at its future prospects we could expect more upside to this stock.
