Mckesson (MCK) To Report Q3 Earnings: A Beat In The Cards?

McKesson Corporation (NYSE:MCK) is scheduled to release third-quarter fiscal 2018 results on Feb 1, before the market opens.

Last quarter, earnings of $3.28 per share beat the Zacks Consensus Estimate of $2.78. In the trailing four quarters, McKesson's earnings beat the same with the average being 4.9%.

Meanwhile, the Zacks Consensus Estimate for revenues for the third quarter is pegged at $52 billion, which improved 3.7% year over year. Let’s see how things are shaping up prior to this announcement.

Why a Likely Positive Surprise?

Our proven model shows that McKesson is likely to beat estimates because it has the perfect combination of two key ingredients.

Zacks ESP: The company has an Earnings ESP of +0.16%. A favorable Zacks ESP serves as a meaningful and leading indicator of a likely positive earnings surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: McKesson currently carries a Zacks Rank #2 (Buy). Note that stocks with a Zacks Rank #1 (Strong Buy), 2 or 3 (Hold) have a significantly higher chance of beating earnings estimates.

We caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

McKesson Corporation Price and Consensus

McKesson Corporation Price and Consensus | McKesson Corporation Quote

What’s Driving the Better-Than-Expected Earnings?

McKesson Specialty Health unit is likely to drive the company’s top line in the third quarter. The unit is likely to benefit from the closing of the intraFUSION acquisition and the recent BDI Pharma buyout.

The company expects to witness solid performance in its Canadian business in the third quarter. Last quarter, McKesson Canada closed the Uniprix banner acquisition and strengthened independent pharmacies. Per management, Uniprix integration activities are progressing well.

Further, McKesson Prescription Technology Solutions business continues to make progress on the CoverMyMeds integration.

Coming to the Technology Solutions segment, the company divested its Enterprise Information Solutions or EIS business, recently. This marks another important step in the strategic shift to realign the company’s business focus on Distribution Solutions, following the creation of Change Healthcare earlier this year.

McKesson’s strong guidance for fiscal 2018 looks encouraging. The upside is expected to be driven by market growth, acquisitions and divestitures. McKesson expects GAAP earnings per share in the range of $4.80-$6.90 for the fiscal year ending Mar 31, 2018. Adjusted earnings for the same are expected in the range of $11.80-$12.50.

Recently, McKesson announced that it has entered into an agreement to buy RxCrossroads from CVS Health (NYSE:CVS) for $735 million.

Other Stocks to Consider

Here are a few other medical stocks worth considering as they also have the right combination of elements to post an earnings beat this quarter.

Bio-Rad Laboratories (NYSE:BIO) has an Earnings ESP of +4.45% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Luminex (NASDAQ:LMNX) has an Earnings ESP of +14.29% and a Zacks Rank #3.

The Cooper Companies (NYSE:COO) has an Earnings ESP of +10.75% and a Zacks Rank #3.

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