Summary
McKesson Corporation's Q2 FY2020 (ended September 29, 2019) report shows a significant net loss of $730 million, or $3.99 per diluted share, primarily driven by a substantial non-cash impairment charge of $1,157 million related to its investment in Change Healthcare JV. While revenues saw a healthy 9% year-over-year increase to $57.6 billion, driven by market growth and expanded business with existing customers, the company's profitability was heavily impacted by this single, albeit non-cash, item. Excluding this impairment, the operational performance appears more stable, with revenue growth and controlled operating expenses as a percentage of revenue. Despite the net loss, the company's core U.S. Pharmaceutical and Specialty Solutions segment showed a 10% revenue increase and a 5% rise in operating profit, demonstrating resilience. However, the European Pharmaceutical Solutions segment experienced a slight revenue decline and reduced operating profit, impacted by store closures and foreign currency fluctuations. The company continues its strategic initiatives, including cost optimization and workforce adjustments, and has a strong liquidity position, with sufficient cash generated from operations and access to credit facilities to meet its obligations. Investors should monitor the resolution of opioid-related litigation, which remains a significant contingent liability, and the company's ongoing strategy for its Change Healthcare investment.
Financial Highlights
50 data points| Revenue | $57.62B |
| Cost of Revenue | $54.75B |
| Gross Profit | $2.87B |
| Operating Expenses | $2.24B |
| Operating Income | $626.00M |
| Net Income | -$730.00M |
| EPS (Basic) | $-3.99 |
| EPS (Diluted) | $-3.99 |
| Shares Outstanding (Basic) | 183.00M |
| Shares Outstanding (Diluted) | 183.00M |
Key Highlights
- 1Reported a net loss of $730 million ($3.99/share), significantly impacted by an $1.157 billion pre-tax impairment charge on the Change Healthcare JV investment.
- 2Total revenues increased by 9% to $57.6 billion, driven by market growth and expanded business, particularly in the U.S. Pharmaceutical and Specialty Solutions segment.
- 3U.S. Pharmaceutical and Specialty Solutions segment showed robust performance with a 10% revenue increase and 5% operating profit growth.
- 4European Pharmaceutical Solutions segment experienced a 1% revenue decline and a significant decrease in operating profit due to foreign currency headwinds and operational challenges.
- 5Operating expenses as a percentage of revenue decreased to 3.89% from 3.98% year-over-year, indicating effective cost management.
- 6The company continues to manage its balance sheet, with a debt to capital ratio of 50.0% and a consistent dividend payment, having increased its quarterly dividend to $0.41 per share.
- 7Significant legal and regulatory risks remain, most notably ongoing opioid-related litigation, which has resulted in an agreement in principle to settle claims with two Ohio counties, incurring an $82 million pre-tax charge.