Cardinal Health scored a big breakout on Friday after racing past fiscal Q1 earnings estimates and boosting full-year guidance. That follows rival Cencora's breakout after reporting earnings early Thursday. The Medical-Wholesale Drug/Supplies group is by far the stock market's top-rated medical group, thanks in part to strong demand for GLP-1 weight-loss drugs.
McKesson, which also is among the three drug-distribution giants, has fought back into buy range after a bout of volatility following its earnings report late Wednesday.
On Thursday, Mizuho raised its price target on MCK stock to 450 from 427, but kept a neutral rating. The firm said stronger-than-expected growth in its pharma segment is being partially offset by headwinds in its business serving primary care providers.
Cencora noted that the 13% revenue growth for its U.S. business would have been 10% without a lift from GLP-1 drugs.
Also of note: Weight-loss drug leaders Novo Nordisk and Eli Lilly topped earnings expectations early Thursday.
Cardinal Health Earnings
Estimates:s Cardinal Health earnings were seen rising 17% to $1.40 a share on 10% revenue growth to $54.8 billion.
Results: Cardinal earnings per share surged 44% to $1.73, as revenue matched estimates of $54.8 billion. Pharmaceutical segment profit rose 18% to $507 million, while the medical supplies segment earned $71 million, reversing an $8-million year-ago loss.
Outlook: Cardinal Health boosted its full-year EPS guidance to a range of $6.75 to $7 from $6.50 to $6.75. Pharmaceutical segment profit is now seen growing 7% to 9%, up from the prior range of 4% to 6%.
Cencora Earnings
Estimates: Cencora earnings per share were seen rising 8% to $2.81 as revenue expands 8% to $66,3 billion
Results: Cencora's fiscal fourth-quarter adjusted EPS rose 10% to $2.86. Revenue grew 12.7% to $68.9 billion.
Cencora said its adjusted operating income margin fell 8 basis points to 1.25% because of increased sales of GLP-1 drugs, which have lower gross profit margins, and lower sales of Covid 19 treatments that have higher gross margins.
Outlook: Cencora introduced its fiscal 2024 outlook for adjusted EPS of $12.70 to $13. The analyst consensus was $12.86 heading into the Q4 report. Cencora sees revenue up 7% to 10%.
McKesson Earnings
Estimates: Analysts expected McKesson earnings per share to rise 1.5% to $6.16. Sales are expected to grow 8% to $76 billion.
Results: EPS rose 3% to $6.06, as revenue grew 10% to $77.16 billion.
Earnings growth was held down by recognition of a $10 million loss for McKesson's Ventures equity investments.
Outlook: McKesson raised its full-year adjusted EPS outlook to a range of $26.80 to $27.40, up from $26.55 to $27.35. The analyst consensus going into Q2 earnings was $27.21.
"The continued strength of our differentiated capabilities in oncology and biopharma services platforms positions McKesson to deliver sustainable growth and compelling long-term shareholder value," CEO Brain Tyler said.
On the earnings call, McKesson noted a moderation in primary care visits and a year-over-year decline in respiratory and flu illnesses. Those trends limited the increase in the earnings outlook.
Further, McKesson said it anticipates a charge of $511 million in Q3 for bad debt related to Rite Aid's bankruptcy, following a $210-million charge in Q2. McKesson is "closely monitoring developments" but doesn't expect Rite Aid to materially weigh on 2024 results.
MCK, COR, CAH Stocks
CAH stock gapped up Friday after earnings and kept rising, surging 6.7% to 100.21. The move lifted CAH above the top of a buy zone from a 94.37 cup-with-handle buy point, according to MarketSmith. The buy zone runs through 99.09.
Cencora rose 2.6% to 192.18 on Thursday, just clearing a 191.46 early entry from a quasi-handle at the right side of a 15-week flat base. COR stock continued to rally on Friday, adding 21.6% to 195.17.
MCK stock survived a shakeout that saw it fall as low as 433.22 on Thursday, but it closed off just 2.6% at 447.60. On Friday, MCK advanced 1.15% to 452.76. McKesson stock is in a buy zone from a five-week flat base with a 441 buy point.
CAH and COR have relative strength lines right at or just below longtime highs, confirming their market leadership. The RS line is the blue line in IBD charts that tracks a stock's progress vs. the S&P 500.
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