01—Abstract
Summary
Summary of the 10-Q filed November 2, 2023. Cited figures are marked; the original filing is the authoritative source.
McKesson Corporation reported strong revenue growth for the first six months of fiscal year 2024, with revenues increasing by 10% to $151.7 billiona compared to the prior year period.
This growth was primarily driven by the U.S. Pharmaceutical segment, which saw higher volumes and price increases, as well as growth in the Prescription Technology Solutions segment. However, net income attributable to McKesson Corporation decreased by 4% to $1.62 billionb for the six-month period, resulting in diluted earnings per share of $11.95, a slight increase from $11.68 in the prior year. The decrease in net income was impacted by a significant provision for bad debts related to Rite Aid's bankruptcy and a notable discrete tax benefit in the prior year.
The company continues to manage substantial opioid-related litigation liabilities, with an accrued liability of $6.6 billionc as of September 30, 2023. McKesson demonstrated a commitment to returning capital to shareholders, repurchasing $1.5 billion in common stock and paying $149 million in dividends during the first six months of fiscal year 2024. The company also increased its quarterly dividend and maintained a substantial remaining authorization for share repurchases, signaling confidence in its ongoing financial health and future prospects.
02—Key points
Key Highlights
- Revenues for the six months ended September 30, 2023, increased by 10% to $151.7 billion, driven by growth in the U.S. Pharmaceutical and Prescription Technology Solutions segments.
- Net income attributable to McKesson Corporation decreased by 4% to $1.62 billion for the six months ended September 30, 2023, compared to $1.69 billion in the prior year.
- Diluted earnings per share from continuing operations increased to $11.95 for the six months ended September 30, 2023, from $11.71 in the prior year.
- The company recorded a $210 million provision for bad debts due to the bankruptcy of its customer, Rite Aid.
- McKesson's total estimated liability for opioid-related claims was $6.6 billion as of September 30, 2023.
- The company returned $1.7 billion to shareholders through $1.5 billion in share repurchases and $149 million in dividends in the first six months of fiscal year 2024.
- The Board of Directors increased the quarterly dividend to $0.62 per share and authorized an additional $6.0 billion for share repurchases.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q2 FY2024, McKesson Corp kept $0.01.
- Revenue$77.22B100.0%
- Cost of revenue−$74.15B96.0%
- Gross profit$3.07B4.0%
- Operating costs−$2.12B2.7%
- Operating income$951.0M1.2%
- Interest, other & tax−$287.0M0.4%
- Net income$664.0M0.9%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2024filed November 2, 2023Financial Statements
Q2 FY2024 against Q2 FY2023
| Line item | Q2 FY2024Q2 FY2023 | Change |
|---|---|---|
| Revenue | $77.22B$70.16B | +10.1% |
| Cost of Revenue | $74.15B$67.06B | +10.6% |
| Gross Profit | $3.07B$3.10B | −0.8% |
| SG&A Expenses | $2.09B$1.95B | +7.3% |
| Operating Expenses | $2.12B$1.97B | +7.5% |
| Operating Income | $951.00M$1.12B | −15.4% |
| Interest Expense | $61.00M$55.00M | +10.9% |
| Net Income | $664.00M$926.00M | −28.3% |
| EPS (Basic) | $4.95$6.47 | −23.5% |
| EPS (Diluted) | $4.92$6.42 | −23.4% |
| Shares Outstanding (Basic) | 134.10M143.10M | −6.3% |
| Shares Outstanding (Diluted) | 134.80M144.10M | −6.5% |
05—Questions
Frequently Asked Questions
What drove the revenue increase in the first six months of fiscal year 2024?
Revenue growth was primarily driven by the U.S. Pharmaceutical segment, fueled by market growth, higher volumes from retail national account customers, and an increase in specialty pharmaceuticals. The Prescription Technology Solutions segment also contributed with higher technology service revenues and increased volumes in third-party logistics and wholesale distribution services.
What is the impact of Rite Aid's bankruptcy on McKesson?
McKesson recorded a $210 million provision for bad debts during the first six months of fiscal year 2024 related to the bankruptcy of Rite Aid. The company expects to recognize an additional provision of $511 million in the third quarter of fiscal year 2024 for trade accounts receivable from sales made in October 2023 prior to Rite Aid's bankruptcy filing.
How is McKesson addressing its opioid-related litigation liabilities?
McKesson has a total estimated liability of $6.6 billion for opioid-related claims as of September 30, 2023. This includes settlement agreements with states, subdivisions, and Native American tribes. The company made payments totaling $529 million related to these settlements in the first six months of fiscal year 2024. While the company believes it has valid legal defenses, an adverse outcome in unresolved matters could materially impact its financial position.
What is McKesson's strategy for returning capital to shareholders?
McKesson is actively returning capital through share repurchases and dividends. In the first six months of fiscal year 2024, the company repurchased $1.5 billion of its common stock and paid $149 million in dividends. The company also recently increased its quarterly dividend to $0.62 per share and has a substantial remaining authorization for future share repurchases, indicating a commitment to shareholder returns.
06—Continue