01—Abstract
Summary
Summary of the 10-Q filed August 7, 2024. Cited figures are marked; the original filing is the authoritative source.
McKesson Corporation reported total revenues of $79.3 billiona for the fiscal second quarter ended June 30, 2024, a 6% increase compared to the prior year.
This growth was primarily driven by its U.S. Pharmaceutical segment, benefiting from market growth in specialty pharmaceuticals and higher volumes. Despite revenue growth, net income attributable to McKesson Corporation saw a slight decrease to $915 millionb, or $7.00 per diluted share, down from $958 million, or $7.02 per diluted share, in the same period last year.
This decline was influenced by increased operating expenses, particularly higher claims and litigation charges related to opioid settlements, and a decrease in gross profit margin. The company repurchased $528 millionc of its common stock and paid $82 million in dividends during the quarter, underscoring its commitment to returning capital to shareholders, with an additional $4.0 billion authorization for share repurchases approved in July 2024.
02—Key points
Key Highlights
- Revenues increased by 6% year-over-year to $79.3 billion, driven by the U.S. Pharmaceutical segment.
- Net income attributable to McKesson Corporation decreased slightly to $915 million ($7.00 per diluted share) from $958 million ($7.02 per diluted share) in the prior year quarter.
- Operating expenses increased by 10% due to higher claims and litigation charges related to opioid settlements ($114 million impact).
- The company returned $609 million to shareholders through $528 million in share repurchases and $82 million in dividends.
- McKesson received $90 million from antitrust legal settlements, recorded as a gain within Cost of Sales.
- A net discrete tax benefit of $125 million was recognized, primarily from an election to change the tax status of a foreign affiliate.
- The company's total estimated liability for opioid-related claims stood at $6.9 billion as of June 30, 2024.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2025, McKesson Corp kept $0.01.
- Revenue$79.28B100.0%
- Cost of revenue−$76.13B96.0%
- Gross profit$3.15B4.0%
- Operating costs−$2.12B2.7%
- Operating income$1.03B1.3%
- Interest, other & tax−$114.0M0.1%
- Net income$915.0M1.2%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2025filed August 7, 2024Financial Statements
Q1 FY2025 against Q1 FY2024
| Line item | Q1 FY2025Q1 FY2024 | Change |
|---|---|---|
| Revenue | $79.28B$74.48B | +6.4% |
| Cost of Revenue | $76.13B$71.46B | +6.5% |
| Gross Profit | $3.15B$3.02B | +4.3% |
| SG&A Expenses | $2.00B$1.87B | +7.0% |
| Operating Expenses | $2.12B$1.92B | +10.5% |
| Operating Income | $1.03B$1.10B | −6.5% |
| Interest Expense | $75.00M$47.00M | +59.6% |
| Net Income | $915.00M$958.00M | −4.5% |
| EPS (Basic) | $7.04$7.07 | −0.4% |
| EPS (Diluted) | $7.00$7.02 | −0.3% |
| Shares Outstanding (Basic) | 129.80M135.50M | −4.2% |
| Shares Outstanding (Diluted) | 130.70M136.60M | −4.3% |
05—Questions
Frequently Asked Questions
What drove the revenue growth in the most recent quarter?
Revenue growth of 6% to $79.3 billion was primarily driven by the U.S. Pharmaceutical segment. This was due to market growth in specialty pharmaceuticals and higher volumes from retail national account customers, alongside increased pharmaceutical distribution volumes in the International segment. This growth was partially offset by price deflation from branded to generic drug conversions.
Why did net income decrease despite revenue growth?
Net income attributable to McKesson Corporation decreased slightly due to a 10% increase in total operating expenses. This increase was largely influenced by $114 million in claims and litigation charges related to opioid-related settlements, as well as a slight decrease in gross profit margin and higher interest expenses.
How is McKesson managing its opioid-related liabilities?
McKesson is actively engaged in settling opioid-related claims. The company recorded a charge of $114 million in the quarter for its estimated liability for these claims. As of June 30, 2024, the total estimated liability for opioid-related claims was $6.9 billion. The company made payments totaling $500 million in July 2024 related to various settlement agreements.
What is the company's strategy for returning capital to shareholders?
McKesson demonstrated its commitment to returning capital through share repurchases and dividends. In the quarter, the company repurchased $528 million of its common stock and paid $82 million in dividends. Furthermore, in July 2024, the Board approved an additional $4.0 billion authorization for share repurchases and increased the quarterly dividend to $0.71 per share.
06—Continue