Earnings call transcript: McKesson Q3 2025 beats EPS forecasts, stock dips

McKesson Corporation reported a strong financial performance for Q3 2025, with adjusted earnings per share (EPS) of $10.12, surpassing the forecast of $9.81. However, revenue fell short of expectations, coming in at $90.82 billion against a forecast of $93.48 billion. Despite the EPS beat, McKesson’s stock closed down 4.45% at $707 in aftermarket trading, reflecting investor concerns over the revenue miss. According to InvestingPro data, the company maintains a "GREAT" financial health score of 3.1, with robust revenue growth of 14.29% over the last twelve months.

Key Takeaways

• McKesson’s EPS of $10.12 exceeded expectations, but revenue fell short.
• The stock declined by 4.45% in aftermarket trading despite the earnings beat.
• Strategic acquisitions in healthcare services continue to bolster growth.
• Cost optimization efforts resulted in $100 million savings.
• Guidance for fiscal 2026 projects revenue growth of 11% to 15%.

Company Performance

McKesson reported robust growth in its financial performance, with full-year consolidated revenues increasing by 16% to $359.1 billion. The company also achieved a 20% year-over-year growth in EPS, reflecting strong operational execution. Strategic acquisitions, including controlling interests in Prism Vision and pending acquisitions in CORE Ventures, have strengthened McKesson’s position in the healthcare services sector. With a market capitalization of $86.9 billion, McKesson stands as a prominent player in the Healthcare Providers & Services industry. InvestingPro subscribers have access to 16 additional key insights about McKesson’s performance and growth potential through exclusive ProTips.

Financial Highlights

• Revenue: $90.8 billion, up 19% year-over-year
• Earnings per share: $10.12, exceeding forecast of $9.81
• Operating profit: $1.6 billion, up 24%
• Shareholder returns: $3.5 billion

Earnings vs. Forecast

McKesson’s EPS beat the forecast by 3.16%, a positive surprise for investors. However, the revenue shortfall of $2.66 billion compared to forecasts may have tempered enthusiasm, as it raises concerns about future growth sustainability.

Market Reaction

Despite the earnings beat, McKesson’s stock declined by 4.45% to $707 in aftermarket trading. The stock’s movement may reflect investor caution over the revenue miss and its potential implications for future performance. The stock remains below its 52-week high of $728.48, though InvestingPro’s Fair Value analysis suggests the stock is currently undervalued. The company has delivered impressive returns, with a 27.56% total return over the past year and maintains strong momentum with a price momentum score of 4.27 out of 5.

Outlook & Guidance

Looking ahead, McKesson has issued a revenue growth guidance of 11% to 15% for fiscal 2026, with an anticipated EPS range of $36.05 to $37.55. The company plans to separate its Medical Surgical segment into an independent entity, aiming to enhance focus and operational efficiency. Trading at a P/E ratio of 31.89, the stock has demonstrated resilience with a low beta of 0.52. For detailed analysis and comprehensive insights, investors can access McKesson’s full Pro Research Report, available exclusively on InvestingPro, along with reports for 1,400+ other top US stocks.

Executive Commentary

CEO Brian Tyler stated, "We delivered a strong fiscal year results with record revenue growth and meaningful strategic advancements." CFO Britt Bidalone added, "Our sustained financial performance over the past several years has been bolstered by the strength of our financial position and the consistent operating execution."

Risks and Challenges

• Potential Medicare Part B reimbursement changes could impact revenue streams.
• Tariff impacts on pharmaceutical and medical surgical businesses may affect cost structures.
• GLP-1 medication access program dynamics could introduce supply chain complexities.
• Independent pharmacy reimbursement concerns may pressure profit margins.

Q&A

During the earnings call, analysts inquired about the potential impact of Medicare Part B reimbursement changes and explored tariff implications on McKesson’s pharmaceutical and medical surgical businesses. The company also addressed concerns about independent pharmacy reimbursement and its effects on future profitability.

Full transcript - McKesson (MCK) Q4 2025:

Conference Operator: Welcome to McKesson’s Fourth Quarter Fiscal twenty twenty five Earnings Conference Call. Please be advised that today’s conference is being recorded. At this time, I’d like to turn the call over to Jenny Dominguez, VP of Investor Relations. Please go ahead.

Jenny Dominguez, VP of Investor Relations, McKesson: Good afternoon, and welcome, everyone, to McKesson’s fourth quarter fiscal twenty twenty five earnings call. Today, I’m joined by Brian Tyler, our Chief Executive Officer and Britt Bidalone, our Chief Financial Officer. Brian will lead off, followed by Britt, and then we’ll move into a question and answer session. Today’s discussion will include forward looking statements such as forecasts about McKesson’s operations and future results. Please refer to the cautionary statements in today’s earnings release and presentation slides available on our website at investor.mckesson.com and to the Risk Factors section of our most recent annual and periodic SEC filings for more information concerning risk factors that could cause our actual results to materially differ from those in our forward looking statements.

Information about non GAAP financial measures that we will discuss during this webcast, including a reconciliation of those measures to GAAP results, can be found in today’s earnings release and presentation slides. Presentation slides also include a summary of our results for the quarter and guidance assumptions. With that, let me turn it over to Brian.

Brian Tyler, Chief Executive Officer, McKesson: Thank you, Jenny. Good afternoon, everyone. Thanks for joining our call. Today, we reported fiscal fourth quarter results marking a strong finish to fiscal twenty twenty five. Thanks to the collective efforts of our 45,000 employees, Team McKesson delivered on a really tremendous year.

We continued significant momentum in advancing our strategy as reflected in the fiscal fourth quarter and full year financial results. Full year consolidated revenues grew 16% from the prior year reaching a record level of $359,000,000,000 Adjusted earnings per diluted share was $33.5 exceeding our expectations. We delivered year over year EPS growth of 20%, which is above long term growth targets of 12% to 14% EPS growth. We also generated strong cash flow and returned $3,500,000,000 of cash to shareholders. Underpinning the strong financial performance is our successful execution of our company priorities.

I want to take a few minutes and highlight some examples of the incredible work Team McKesson has achieved this year. First, we made strategic acquisitions that will accelerate our strategy in oncology and other specialties, including the completed acquisition of a controlling interest in Prism Vision and the pending acquisition of a controlling interest in Community Oncology Revitalization Enterprise Ventures or CORE Ventures. These additions mark an important step as we continue our efforts to empower community based providers and improve care experiences for patients. I’ll share more about these acquisitions in just a moment. Secondly, we strengthened our core distribution capabilities through targeted investments in technology and infrastructure.

Our team continues to deliver on operational excellence and quality customer service. Our differentiated customer value proposition is reflected in the successful onboarding of several new customers, including a new strategic partner during fiscal twenty twenty five. The last thing I’ll mention is initiatives that we launched that will accelerate and modernize the enterprise. Throughout the company, our teams are identifying and capturing opportunities, including the use of technology, automation, and AI that will allow us to strengthen the business platform, improve operational efficiencies, and enhance our financial profile, all while better serving our customers. This exceptional execution and growth are a testament to the hard work of our employees, and I’m grateful for their dedication, their passion, and their unwavering focus to advance our mission.

The continuous advancement and successful execution of our strategy along with our strong performance in fiscal twenty five has ensured the foundation for success as we look forward. Today, we initiated our fiscal twenty twenty six guidance reflecting our confidence to extend the momentum, further enhance our differentiated capabilities, execute on our strategy, and ultimately advance health outcomes for all. I wanna focus my, comments today on the strategies that have been and we believe will continue to be the the center of our company’s focus. And then I’m gonna turn it over to Britt for more of the financial details, including the fiscal twenty twenty six outlook itself. As always, let me start with our focus on people and culture, which underpins all of our success.

We operate in an ever evolving health care landscape where where change, quite frankly, happens fast. It’s important to me that we empower our employees with the right tools and the resources to drive innovation and improve efficiency. We provide training and skill development designed for employees at all levels of the organization, individual contributors, frontline managers, people leaders. We cover a range of skills from managing and leading teams, performance development, to technology and AI. Developing our talent creates an environment where our teams can better serve our customers, our customers’ patients, and each other.

We will continue this investment in our people as we invest to grow our future. Moving on to our two strategic growth pillars, oncology and biopharma services. We continue to enhance our differentiated capabilities in our oncology platform. In the past year, the US Oncology Network welcomed two new practices, Illinois Cancer Center and Tennessee Cancer Specialists, growing the total provider count to over 2,700 across six forty five sites in 31 states. Through these community based oncology sites, more than one point four million patients receive high quality care close to home every year.

This past year, we announced an agreement to acquire a controlling interest in Core Ventures, a business and administrative services organization established by Florida Cancer Specialists and Research Institute. I’m pleased to share that we have cleared regulatory approval and expect to complete the acquisition on 06/02/2025, subject to customary closing conditions. After completion, Florida Cancer Specialists, along with its five thirty providers, will become a member of the US Oncology Network. One of the rising challenges of the cancer care experience is managing the sustainability of healthcare costs. In the past decade, we’ve invested in and we’ve supported the community based oncology providers.

We believe the community based setting is an important channel that provides high quality and lower cost options to patients, including those in underserved communities. We have been a proponent of policies and reforms that will improve access to treatment in local communities and increase financial sustainability for patients. A good example of this is our participation in value based care programs. The practices within the US Oncology Network are leading the way in finding opportunities to reduce treatment costs and enhance quality in oncology. Seventy percent of the physicians in the U.

S. Oncology Network participate in the enhancing oncology model. At the network level, we support practices with the necessary resources and transformational strategies to excel in this initiative. In the recently reported first performance period, over 90% of the participating practices reduced cost versus benchmark, driving meaningful savings to patients and advancing the cancer care experience. Beyond opportunities in oncology, we’re also building capabilities in other specialties where we see the opportunity for us to create differentiated platforms as we have done in oncology over the past decade.

In April, we closed the acquisition of a controlling interest in Prism Vision, a provider of general ophthalmology and retina management services. This is a quite logical expansion for us when we think about community based care. We’ll be able to build on the recent capabilities we’ve developed around the GPO and other value added services in the ophthalmology and retina space. Our team is working diligently on integrating the business, and we look forward to this new growth opportunity for McKesson and supporting more practices to provide world class eye care. Moving on to our biopharma services platform, the prescription technology solutions segment delivered a strong year with double digit growth in adjusted operating profit.

Business growth was supported by continued strong demand for our access and affordability solutions, new business wins, and a growing network of digital connections to providers and pharmacies. In the past year alone, we helped patients save more than $10,000,000,000 on brand and specialty medications. We helped to prevent an estimated 12,000,000 prescriptions from being abandoned due to affordability challenges, and we help patients access their medicine more than 100,000,000 times. Fiscal fourth quarter is typically the busiest time of year as we support patients with their annual verifications. This year, we delivered a particularly strong season supporting a record number of 3,000,000 patients in their journey to access the medicines they need.

Our team achieved high levels of efficiency by leveraging technology to optimize processes and streamline the operation. As an example, in this past season, we were able to leverage our CoverMyMeds virtual assistant to automate more than 20% of chat within the patient support center while importantly maintaining customer satisfaction scores equivalent to those of live agent interactions. As I reflect on our progress in enhancing our oncology and biopharma platforms, it’s hard not to be proud of what team McKesson has achieved. These two strategic growth pillars continue to represent attractive market opportunities, and we will continue to drive our mission forward with innovation, speed, and focus. Now let me move on to our next strategic priority centered around disciplined portfolio management.

We have a portfolio of differentiated assets, and as part of our continuous practice to evaluate the businesses for strategic alignment, which enables us in turn have more focus and investment in our growth pillars and allows us to efficiently deploy capital. In the past, this has led to several actions like the spin off of Change Healthcare, the divestiture of our European businesses, and most recently, divestiture of the Canadian Retail business. These actions have unlocked value for the business and created significant value for our shareholders. Today, we are announcing our intent to separate the Medical Surgical segment into an independent company. Over these past years, we have built a really great medical business focused on what we think are the most attractive markets in the alternate sites of care.

We have a dedicated and an experienced team that works closely with customers to provide the best quality of service. Since we started reporting this segment in fiscal twenty nineteen, the business has delivered consistent and solid growth. We continue to enhance our strategic focus. Separation transaction is an important step to focus capital deployment on opportunities that align with the long term enterprise strategies and further invest in strategic growth areas like oncology and biopharma services. We believe this action will unlock significant value for the medical business and for McKesson.

It will result in two well capitalized at scale world class companies that are well positioned to pursue their respective strategies and growth priorities. We expect the medical surgical business will continue to deliver exceptional value to its customers and patients as a differentiated medical surgical supply and solutions company. We have started the process to explore the right transaction. We anticipate providing you with additional information, including time line and structure when appropriate. Britt will also share more details with you on the assumptions in the fiscal twenty twenty six guidance.

Moving on to our core distribution businesses. The U. S. Pharmaceutical segment delivered strong performance with double digit growth in revenue and adjusted operating profit. Our team demonstrated exceptional execution to support the significant growth of the business.

We saw broad based strength across the segment and stable market fundamentals, including solid pharmaceutical utilization trends. Our scaled capabilities in specialty distribution and our deep channel expertise continue to position us well to support this fast growing category of pharmaceuticals. The strength of our business is also a reflection of the strength of our customers. They are at the center of everything we do, we’re pleased to serve them as a pharmaceutical distributor and long term strategic partner in enabling quality patient care. Our Canadian business, which makes up the majority of our international segment, also had a year of strong operational growth led by the pharmaceutical distribution business.

In the Medical Surgical segment, we finished the year in line with our expectations. We took effective actions to better align our service model and our capabilities with customer needs and the market demand. These actions delivered meaningful savings in fiscal twenty twenty five and positions this business for sustainable growth in the years ahead. As we look out and we look forward, we face a dynamic market environment with uncertainties in policies and the macroeconomic conditions. We continue to evaluate any potential impact to our company and make business planning decisions based on current policy and regulation.

We are positioned with a strong sourcing program through a broad supplier base across the pharmaceutical and medical surgical businesses. The disciplined execution of our sourcing programs has delivered great value to our customers and allows us to remain focused on driving cost efficiencies and maintaining consistent product availability. Let me sum things up before I hand it over to Britt. We delivered a strong fiscal year results with record revenue growth and meaningful strategic advancements. We have a large and diversified portfolio of assets and driving 20% adjusted earnings per diluted share growth at the enterprise level takes tremendous focus, dedication and disciplined execution.

Thanks to the commitment of each and every member of team McKesson. We’re making remarkable progress in advancing our strategy and improving health care in every setting. Looking out, we have strong conviction in our strategy and our ability to consistently execute and deliver long term value. Team McKesson is excited and committed to fulfill our mission and continue that momentum in fiscal twenty twenty six and beyond. With that, Britt, I’ll hand it to you.

Britt Bidalone, Chief Financial Officer, McKesson: Thank you, Brian, and good afternoon. Fiscal twenty twenty five represents another year of outstanding financial results. As Brian talked about in his opening comments, we’re executing against all pillars of our enterprise strategy. This includes disciplined portfolio management. Today’s announcement of our intent to separate our Medical Surgical Solutions segment into an independent company aligns with our commitment to maximizing shareholder value.

We anticipate a separation will allow McKesson and the new company to better focus on their strategies and more effectively deploy capital. The creation of these two world class, well capitalized companies that are well positioned to pursue their respective strategic growth opportunities is a positive development and will unlock significant value for both companies. Turning now to our financial performance. My comments today will refer to our adjusted results. I’ll start by discussing our fourth quarter and full year fiscal twenty twenty five results, then provide an overview of our fiscal twenty twenty six outlook.

McKesson delivered a strong fourth quarter and as a result, we’re exiting the year with significant momentum. We delivered earnings per diluted share of $10.12 in the fourth quarter and $33.05 for the full year, which exceeded the guidance range that we provided on our third quarter earnings call. Our fourth quarter results reflect continued strong execution as we work to advance our company priorities. Consolidated revenue in the quarter increased 19% to $90,800,000,000 led by growth in The U. S.

Pharmaceutical segment due to increased prescription volumes from retail national account customers and growth in the distribution of specialty products, including higher volumes in oncology and other specialty provider settings. Gross profit was $3,400,000,000 an increase of 2%, result of specialty distribution and provider growth within The U. S. Pharmaceutical segment and growth in the prescription technology solutions segment driven by our access and affordability solutions, partially offset by lower contributions in our International segment, a result of the divestiture of our Canada based Rexall and Well.ca businesses at the end of the third quarter of fiscal twenty twenty five. Operating expenses decreased 10% to $1,900,000,000 driven by divestitures in the Canadian business and cost optimization initiatives in the Medical Surgical Solutions segment.

To support future growth and create greater alignment across the Medical segment and with its customers, we previously announced cost optimization actions in our Medical segment. These actions have streamlined the infrastructure, increased focus, and driven operational efficiency resulting in approximately $100,000,000 of cost savings in the second half of fiscal twenty twenty five with a higher proportion realized in the fourth quarter. These savings were in line with guidance previously provided. Operating profit was $1,600,000,000 an increase of 24%. Year over year results benefited from growth across all operating segments including strong oncology and other specialty provider volumes, the onboarding of a new strategic customer in the second quarter and increased demand for access solutions in our prescription technology solutions segment.

Interest expense was $40,000,000 a decrease over the prior year resulting from effective cash and portfolio management including our derivative portfolio. The effective tax rate in the fourth quarter was 13% compared to 28% in the prior year driven by the recognition of discrete tax benefits in the quarter. For the full year, the effective tax rate was within the guidance previously provided. Fourth quarter diluted weighted average shares outstanding was $125,900,000 a decrease of 4%. Fourth quarter earnings per diluted share increased 64% to $10.12 Year over year growth was driven by a lower effective tax rate and strong operational growth across the business.

Turning to fourth quarter segment results, which can be found on slides eight through 12 and starting with U. S. Pharmaceutical. Revenues were $83,200,000,000 an increase of 21% driven by increased prescription volumes from retail national account customers and growth in the distribution of specialty products including higher volumes in oncology and other specialty provider settings. Revenues from GLP-one medications were $10,900,000,000 in the quarter, an increase of approximately $3,500,000,000 or 46% when compared to the prior year.

On a sequential basis, GLP-one revenue was flat. Segment operating profit increased 17% to $1,100,000,000 driven by higher volumes from retail national account customers. This growth was further supported by the successful onboarding of a new strategic customer in our fiscal second quarter. Additionally, the distribution of specialty products to oncology and other specialty providers and health systems contributed to growth. In the Prescription Technology Solutions segment, revenues increased 13% to $1,300,000,000 and operating profit increased 34% to $285,000,000 Fourth quarter results reflect increased prescription transaction volumes, which drove higher demand for our access solutions, including prior authorization services for GLP-one medications and our third party logistics business.

Additionally, a strong annual verification season, as Brian mentioned, contributed to these positive results. Total initiated prior authorization volume increased by 15% in the quarter compared to prior year. Turning to Medical Surgical Solutions. The overall fiscal twenty twenty five illness season was below the average of the past five non COVID seasons. In the fiscal fourth quarter, illness season severity levels were moderately above those experienced in the prior quarter.

Increased illness severity levels at the beginning of our fiscal fourth quarter peaked in early February. In the fourth quarter, revenues were $2,900,000,000 an increase of 1% driven by higher volumes of specialty pharmaceuticals, partially offset by lower primary care volume, customer mix and product demand shifts across the primary care channel. Operating profit increased 15% to $285,000,000 reflecting the benefits and operational efficiencies from the cost optimization initiatives announced in the first quarter. We’re pleased with the results of these cost actions, enhancing financial performance and positioning the business to better serve our stakeholders and achieve sustainable growth. Next, let me address our international results.

Revenues were $3,500,000,000 a decrease of 2% resulting from the divestiture of our Canada based Rexall and Well.ca businesses completed at the end of the third quarter of fiscal twenty twenty five. Operating profit was $102,000,000 an increase of 9% driven by higher pharmaceutical distribution volumes in the Canadian business. Wrapping up our segment review with corporate. Corporate expenses were $165,000,000 a decrease of 15%. As a reminder, in the fourth quarter of fiscal twenty twenty four, we recorded a $09 per share reserve for environmental matters for increased remediation costs related to McKesson’s former chemical business which we disposed of several years ago.

In the fourth quarter of fiscal twenty twenty five, we also had higher interest income resulting from higher cash balances on average during the quarter and lower opioid related expenses. Let me turn to cash and capital deployment which can be found on Slide 13. We ended the quarter with $5,700,000,000 in cash and cash equivalents and total liquidity of approximately $10,000,000,000 During the fiscal fourth quarter, we delivered robust free cash flow of $7,500,000,000 These results were driven by strong fourth quarter operating results and a timing shift from our fiscal third quarter to our fiscal fourth quarter drove the cash flow performance. Free cash flow included $278,000,000 of capital expenditures, primarily related to investments in new and existing distribution centers as well as investments in technology, data and analytics to support our growth priorities. In the fourth quarter, we returned $391,000,000 of cash to shareholders, which included $300,000,000 in share repurchases and $91,000,000 in dividend payments.

Let me take a moment and summarize our outstanding full year fiscal twenty twenty five results, which exceeded our initial guidance. Additional details including segment results can be found in our press release. Fiscal twenty twenty five revenues increased 16% to $359,100,000,000 reflecting broad based operational strength across the business including the onboarding of a new strategic customer in our U. S. Pharmaceutical segment.

Operating profit of $5,600,000,000 increased 15 above the prior year led by double digit growth in The U. S. Pharmaceutical And Prescription Technology Solutions segment and our Canadian business within international. Operating profit also included $101,000,000 in net gains related to McKesson Ventures equity investments compared to a loss of $24,000,000 in fiscal twenty twenty four. Excluding the impact of net gains related to McKesson Ventures, operating profit increased 12% compared to the prior year, well above our long range target.

As a result of the strong operational growth across the business, combined with a lower share count, full year fiscal twenty twenty five earnings per diluted share increased 20% to $33.05 exceeding our expectations. We continued our focus on cash flow generation, working capital management and capital deployment throughout fiscal twenty twenty five. This execution resulted in generating 5,200,000,000 in free cash flow, which included $859,000,000 of capital expenditures, primarily related to investments to accelerate growth and modernize the business. We returned $3,500,000,000 to shareholders including $3,100,000,000 through share repurchases and $345,000,000 in dividends. Since the beginning of fiscal twenty twenty, we’ve returned approximately $18,000,000,000 of cash to shareholders through share repurchases and dividends.

Of this amount, over $16,000,000,000 has been returned through share repurchases, reducing our total shares outstanding by 34%. Moving now to our fiscal twenty twenty six outlook. Our strong finish in the fourth quarter and performance throughout the course of fiscal twenty twenty five gives us confidence in our ability to continue the momentum and deliver strong results in fiscal twenty twenty six. The breadth of our capabilities and leading portfolio of assets across oncology and biopharma services along with our strong pharmaceutical distribution businesses have led to value creation for our customers, partners and shareholders over the last several years. We entered fiscal twenty twenty six with a strong balance sheet, financial position and significant liquidity positioning us for continued growth.

For fiscal twenty twenty six, we anticipate revenue growth of 11% to 15% and operating profit growth of 8% to 12% compared to the prior year. For fiscal twenty twenty six, we anticipate earnings per diluted share of $36.07 $5 to $37.55 This outlook represents approximately 11% to 14% growth year over year, which is 13% to 16% growth when excluding the net gains from McKesson Ventures in fiscal twenty twenty five, exceeding our long range growth target of 12% to 14%. And today, we’re reaffirming the long term adjusted earnings growth target rate of 12% to 14%. Let me start with a review of our segments. In The U.

S. Pharmaceutical segment, we anticipate revenue and operating profits to increase 12% to 16%. As a reminder, we onboarded a new strategic customer at the beginning of fiscal twenty twenty five in our second quarter. We now project total annual revenue of approximately $46,000,000,000 from this customer. As mentioned earlier, we anticipate continued growth of the GLP-one category of medications, however, with variability from quarter to quarter.

In fiscal twenty twenty five GLP-one revenues were $41,000,000,000 an increase of 41% over fiscal twenty twenty four. We anticipate continued momentum in our core pharmaceutical distribution business, powered by the growth of specialty products, including continued growth in the distribution of specialty products to community providers. In fiscal twenty twenty five, we saw net additions of approximately 160 providers to the U. S. Oncology network.

Over the past three fiscal years, we’ve added approximately seven twenty five providers to the U. S. Oncology Network. In fiscal twenty twenty six, we anticipate continued growth across our oncology and other specialty platforms, building on the growth of the U. S.

Oncology network, ONTATA and FCRI. Our fiscal twenty twenty six outlook also includes the contribution from two recently announced acquisitions. On April 2, we completed the acquisition of a controlling interest in Prism Vision Holdings, a premier provider of general ophthalmology and retina management services. McKesson has an approximate 80% ownership interest and will consolidate the results of operations within our U. S.

Pharmaceutical segment. We estimate Prism will contribute $0.02 0 to $0.30 of adjusted earnings per share in fiscal twenty twenty six. The transaction to acquire a controlling interest in Core Ventures, an internal business and administrative services organization established by Florida Cancer Specialists and Research Institute, remains subject to customary closing conditions. The addition of Core Ventures will add approximately five thirty providers to The U. S.

Oncology network, bringing the total number of providers to approximately 3,300. As a reminder, McKesson will purchase a controlling interest in Core Ventures for approximately $2,490,000,000 which will represent approximately 70% ownership. We’ve made substantial progress and our outlook assumes that we will close this transaction in June of twenty twenty five. We estimate the acquisition of Core Ventures will contribute $0.04 0 to $0.60 of adjusted EPS in fiscal twenty twenty six. We expect to fund this transaction with permanent financing of approximately $2,000,000,000 and used cash to fund the remainder of the transaction.

McKesson remains committed to maintaining its current investment grade rated status. We anticipate the acquisitions of Prism and Core Ventures will contribute approximately 6% to 7% to the fiscal twenty twenty six operating profit growth in The U. S. Pharmaceutical segment. As a result of the continued strength exhibited in fiscal twenty twenty five and our confidence in this segment, we’re raising the long term adjusted operating profit growth target from 5% to 7% to a new range of 6% to 8%.

In the Prescription Technology Solutions segment, we anticipate revenues to increase by 4% to 8% and operating profit to increase by 9% to 13%. This strong growth reflects the differentiated portfolio of solutions and is evidence of strong market demand for our access and affordability solutions. It includes organic growth across the segment as we expand relationships with biopharma manufacturers and bring new brands to our platform. We anticipate the fiscal twenty twenty six revenue growth rate to be slightly lower than the fiscal twenty twenty five revenue growth rate, driven by a slower rate of growth for third party logistics volumes. As a reminder, 3PL revenues contribute approximately 50% of the segment volume and can vary from quarter to quarter driven by timing and the trajectory of new drug launches and the addition of new programs which we serve.

3PL contributes less than approximately 5% to the segment operating profit. We anticipate continued contribution from prior authorization services with GLP-one medications driving increased demand for our access and affordability solutions contributing to the growth of the segment. We anticipate increased investment to support expanded access solutions which include enhanced prior authorization capabilities for pharmacy and medical benefits. We’re pleased with the consistent strength and performance in the segment. We’ll continue to invest in the segment to develop new and adjacent solutions and we’re reaffirming the long term adjusted operating profit growth target for this segment of 11% to 12%.

In the Medical Surgical Solutions segment, we anticipate revenues and operating profit to increase 2% to 6% in fiscal twenty twenty six. We remain well positioned across all alternate sites of care with a market leading breadth of services and solutions across medical surgical, pharmaceutical, lab and home health solutions. As we previously discussed, in fiscal twenty twenty five, we observed generally softer volumes in the primary care market, which included the impact of overall lower severity levels for the fiscal twenty twenty five illness season. As we previously discussed, each illness season is unique and the timing and severity level of each illness season can drive variability from quarter to quarter and year to year. Additionally, we’re pleased with the focus and discipline to accelerate the business and accelerate comprehensive cost optimization set of initiatives.

These initiatives are driving operational efficiencies, delivering improved focus and performance and greater alignment across the business and with our customers. As Brian and I have already discussed today, we’ve announced our intention to separate the Medical segment into an independent company. This strategic decision is designed to enhance operational focus and further enhance strategic operations and opportunities of both companies. This decision is designed to unlock significant value for both companies. The new company would be a differentiated medical surgical supply company with a compelling leadership position, attractive margins and potential for growth acceleration across all alternate types of care.

The separation is consistent with McKesson’s disciplined portfolio management approach and will further focus capital deployment priorities for both companies. We’re committed to exploring all opportunities to execute the separation in a manner that maximizes shareholder value. Our fiscal twenty twenty six outlook assumes 100% ownership of the Medical segment. We’ll provide more information as appropriate on the form and timing as the process progresses. In the international segment, we anticipate revenues to be approximately a 2% decline to 2% growth and operating profit to be flat to 5% decline.

The segment outlook reflects continued growth in the Canadian distribution business, partially offset by the impact of the divestiture of our Canada based Rexall and Well.ca businesses at the end of the third quarter of fiscal twenty twenty five. As a reminder, 2025 includes $25,000,000 resulting from the held for sale accounting related to the sale of our Canada based Rexall and Well.ca businesses, which was completed on 12/30/2024. Our fiscal twenty twenty six outlook contemplates contributions related to operations in Norway through calendar 2025. As a reminder, Norway remains the only operating country remaining in Europe. We remain committed to exit and fully divest our European business and have entered into an active sale process for our Norwegian business.

We will however be disciplined and focused on maximizing shareholder value throughout the sale process. In the corporate segment, we anticipate expenses to be in the range of $570,000,000 to $630,000,000 We continue to invest across the business to modernize and accelerate the enterprise to deliver growth. This includes significant investments in data and analytics, including several investments in cloud, networking, and infrastructure. Additionally, we anticipate accelerating the use of automation, including AI, to unlock the potential to deliver customer and foundational enhancements. Now moving below the line, we anticipate interest expense to be approximately $255,000,000 to $275,000,000 and income attributable to non controlling interests to be in the range of $215,000,000 to $235,000,000 The increase in the interest expense guidance range as compared to fiscal twenty twenty five reflecting anticipated financing impact related to the acquisition of a controlling interest in Core Ventures.

And income attributable to non controlling interest guidance incorporates the full year impact from our controlling interest in Prism Vision Holdings and the estimated impact from the acquisition of a controlling interest in Core Ventures as discussed earlier. We anticipate the full year effective tax rate will be in the range of 17% to 19%. And as a reminder, the timing and amount of discrete tax items are difficult to predict. Therefore, we do not provide quarterly effective tax rate guidance. Turning now to cash flow and capital deployment.

We anticipate free cash flow of approximately 4,400,000,000.0 to $4,800,000,000 Our working capital metrics and results in free cash flow will vary from quarter to quarter and are impacted by timing, including the day of the week that marks the close of a quarter. Our outlook reflects plans to repurchase approximately $2,500,000,000 of shares in fiscal twenty twenty six. And as a result of the share repurchase activity, we estimate weighted average diluted shares outstanding to be in the range of approximately 124,000,000 to $125,000,000 Our focus on portfolio management, including disciplined capital deployment, is reflected by the improvements in our return on invested capital. Over the past five years, return on invested capital has more than doubled to 26% at the end of fiscal twenty twenty five. This performance is a result of a clear and consistent enterprise strategy, operational execution against that strategy and disciplined management of our portfolio of businesses.

We’ll continue to focus capital deployment on the growth strategies in oncology and biopharma solutions to create enhanced value for our shareholders. In summary, we delivered outstanding performance in fiscal twenty twenty five. The strength and stability in the underlying fundamentals across our businesses combined with robust cash flow generation and disciplined capital deployment have led to a strong outlook for fiscal twenty twenty six. Our sustained financial performance over the past several years has been bolstered by the strength of our financial position and the consistent operating execution leading to compelling value creation for our customers, partners and shareholders. I also wanted to take a moment to thank McKesson and McKesson’s team of outstanding associates for the outstanding results that we had in fiscal twenty twenty five.

I’m confident in our ability to deliver another strong year in 2026 with growth acceleration, margin expansion and value creation. With that, we should move to the Q and A session.

Conference Operator: Thank And the first question comes from Kevin Calindo with UBS.

Kevin Calindo, Analyst, UBS: Thanks. There’s so much to unpack here. I guess I’ll be the bad guy and ask the MFN question since it impacted the stock so much today. Can you help us just sort of understand that risk? Meaning, if there is some sort of Medicare Part b MSN impact to ASPs, which is kind of what the headlines have proposed, Can you just sort of help us understand, because it’s it’s 95% of all the questions I’ve got today, to understand how it would impact both the core distribution business and your specialty clinics business, if at all?

I mean, a lot of us just don’t really understand how the economics or the math work, and I think it would provide a ton of clarity if you can help us understand it.

Brian Tyler, Chief Executive Officer, McKesson: Thank you, Kevin. I’ll, I’ll go first. And, my understanding, and admittedly, I haven’t checked social media for a couple hours, is that, nothing has really been announced. It’s all kind of rumored at this point. And if history is our guide, there will probably be plenty of legal challenges.

And so I think we’ll have we’ll have time to deal with this as as actual facts emerge and and not speculate on it. I I will say, you know, about the specialty providers, you know, our fundamental belief is and I think this this is definitely true. Community based care is the most accessible. It is high quality, and it is a low cost setting of care. So it is gonna be a critical part of this country’s ability to manage the overall accessibility, affordability, and quality of care, particularly oncology care.

And so our advocacy and our belief is that community based care, needs to be and will be fairly compensated in totality for the services they that they provide, whether that’s through drug pricing structures or other service fees that that are provided, it’s absolutely essential that we have a vibrant community based care setting. You know? Otherwise, these patients, if they can get care, are gonna be getting that care in a higher cost setting to the to the to the system overall. You know, in the in terms of the distribution side of the business, I mean, I think we’ve always said, and we have successfully illustrated over the years, our ability to get paid fair value for the services that we provide. And that would be, you our expectation in this case as well.

Jenny Dominguez, VP of Investor Relations, McKesson: Next question please.

Conference Operator: And our next question comes from Lisa Gill with JPMorgan.

Lisa Gill, Analyst, JPMorgan: Thanks very much. Brian, just a comment to what you just said. I think if you look back at 2018, Trump proposed something kind of similar to to shifting around, you know, potential payment on Part b and never came to fruition. So again, I think we’re all watching this. Wanna try to better understand this.

Because two things I’m sorry. Go ahead.

Brian Tyler, Chief Executive Officer, McKesson: I was gonna say it was definitely a time warp moment.

Lisa Gill, Analyst, JPMorgan: It is. I feel like deja vu if I have to keep writing these same research notes. But but if if we think about some of the other areas, I just wanna make sure we also understand the tariff side on both sides of your business. So, you know, both one on the branded as well as the generic side of the pharmaceutical. And then I know that ultimately you won’t have the medical supply business, but in fiscal twenty twenty six, can you talk about what you potentially have in your guidance around any tariffs and if you’ll have any impact on that side?

Brian Tyler, Chief Executive Officer, McKesson: Sure. We can Britt and I can tag team this one. Obviously, we’re closely monitoring the, the tariff landscape, and I’m sure everyone saw even as earlier today, The UK a new UK agreement So it is it is pretty dynamic. I would, you know, point back to, though, our our primary model.

Let’s start in the pharmaceutical business. You know, we we source from the brand. You know, we have a reimbursement mechanism based on the price, and we have a sell forward mechanism based on the price. Manufacturers are gonna make the pricing decisions that that they think they need to do. We don’t think overall, it’s gonna be material and what, you know, our assessment of the landscape has been considered in the guidance that we provided, to you based on the policies that we’re aware of and we know today.

On the generic side, we’re sourcers in in the North Star program, and we don’t have fixed capital deployed in any country. And you think about our sourcing program and even coming out of the COVID experience, you know, we have we have been over time working to diversify, create a reliable, predictable, supply chain. And we think we’re we are pretty well positioned. We are not over rotated toward any any one particular country. So I think we’ll be okay there.

And then on the medical surgical side, I would just say we have a similar sourcing strategy. I mean, we we try to be diversified, resilient, have redundancy in that. We don’t have a fixed plant anywhere. So we, as as tariffs settle themselves out, and we can move sourcing around to what would then be the most advantageous source. And then the last thing I would say is by nature of our customer base and the markets that we serve, we tend to have flexibility around pricing.

Our goal is always to provide the low cost best value that we can, but we have that as a as a lever.

Unidentified Speaker: The the only thing I would

Britt Bidalone, Chief Financial Officer, McKesson: just add, I just maybe, put a highlight on what Brian said, we do not anticipate this is gonna have a material impact on our fiscal twenty six guidance. It’s you know, our understanding of the tariff situation today, Obviously, it’s evolving, but our understanding of it today, we have that incorporated into our guidance. And, you know, I would just also emphasize what Brian said that in the medical business, as an example, we source the largest spend of products in The US. So we’ve continued for a number of years now to continue to diversify and focus on responsible sourcing. And and in doing that, we have remediated a lot of the risk that we may have had several years ago.

Jenny Dominguez, VP of Investor Relations, McKesson: Next question, please.

Conference Operator: The next question comes from Allen Letts with Bank of America.

Kevin Calindo, Analyst, UBS: Good afternoon. Thanks for taking the questions. One for Brian. With the separation of MedSurg, clearly, guys are doubling down in U. Pharma and Prescription Technology Solutions.

It feels like there’s more urgency today to accelerate capital deployment in biopharma services. Can you just talk about the urgency that McKesson has here to focus on MSOs and building out McKesson’s platform. Is that urgency that you’re feeling bigger than it was maybe one or two years ago? And then how big is the opportunity to continue to invest in this space? Thanks.

Brian Tyler, Chief Executive Officer, McKesson: Yeah. Great question. I mean, the the first thing I’ll say is that, you know, capital deployment for us is always driven by alignment to our strategy and financial discipline in executing those transactions. And I would not I would say, personally, the urgency hasn’t changed for me at all. We’ve had the same level of urgency maybe earlier or, you know, a few years if I roll the clock back.

We had a difficult time finding valuations that we thought made financial sense and cleared our financial hurdles. We stay in those conversations. You know, in in in this world, oftentimes, these conversations go for years before they become actionable. So, you know, the the urgency is always there to invest prudently against our strategy in a way that we’re confident will accelerate and continue our growth and to create shareholder value. It’s really a matter of when you can execute on the opportunities.

Britt Bidalone, Chief Financial Officer, McKesson: The only thing I would add is this is very consistent with the way that we’ve operated for several years. Again, to Brian’s point, it’s always started with strategy. So our where we’re deploying capital today is very consistent with our strategy. If you go back several years, we’ve continued to look at the portfolio and reallocate capital where it has the highest return, where it has the highest opportunities, and it leverages our differentiated assets. We divested the Change Healthcare asset.

We divested our European businesses, and most recently Rexall and Well.ca, all to get better alignment to our strategy and deploy our capital to differentiated assets with higher returns. This is very consistent with what we’ve done for several years.

Jenny Dominguez, VP of Investor Relations, McKesson: Next question, please.

Conference Operator: The next question will come from Eric Percher with Nephron Research. Thank you.

Eric Percher, Analyst, Nephron Research: Big picture question first on the pharma growth rate long term guidance moving up here. I would expect that relative to two years ago, the macro environment has been a real tailwind. And I’m curious to hear if the step up in guidance reflects that you believe the macro environment stays that strong or if it is more to do with the opportunities that you’re seeing based on the expansion of the platform and what you were just speaking about on capital deployment? And then, Britt, I would ask you pharma guidance for this coming year, 12% to 16%, that’s a pretty large range. Does it sounds like core is in that.

Help us understand what drive you from the bottom to the top of that range.

Brian Tyler, Chief Executive Officer, McKesson: So, in terms of the macro environment, you know, look, we’ve we feel really good about the value propositions we have for for the customers we serve. We we feel like we’ve onboarded some strategic customers over the last couple of years consecutively where where we will as we help them be successful, their growth will help us be successful. We’ve seen solid utilization trends. We think we’ve got a differentiated growth platform in oncology, and all these things can contribute to to our view. I mean, the external environment today, you know, is probably there’s more moving parts than than than typically we would see.

But if you, you know, step back further, health care is a pretty resilient industry. You know, the underlying core fundamentals continue to support growth, and we think, you know, the innovation will continue in the pharmaceutical segment, and we’ll be positioned to benefit from that.

Britt Bidalone, Chief Financial Officer, McKesson: And and, Eric, before I answer your second question, you know, this is the second time in the last few years that we’ve raised the long term guidance range for this segment. We started out at four to six percent and five went to five to seven and now six to eight. And it’s really a reflection of the things that Brian talked about. We’re in a more stable environment for prescription utilization, and we’ve continued to build the platforms that we’ve been focused on in oncology and now other specialties. So I think it’s a natural evolution of the the way we’ve deployed capital in a very successful way to generate additional growth.

If you think about the range for next year, as I mentioned in my comments, we’ve included two acquisitions into the growth of the segment for next year, which we anticipate will generate six to 7% of that growth, which means that the core, our assumption for next year is growing around 6% to 9%, which is very consistent with the new range that we provided on the long term growth rate. Again, I think that’s continuing to add customers and getting operational efficiency some of the investments that we’ve made to generate some operating leverage around automation, and we feel very comfortable that the business now is going to run at that 6%

Brian Tyler, Chief Executive Officer, McKesson: to 8% level.

Jenny Dominguez, VP of Investor Relations, McKesson: Next question, please.

Conference Operator: And that question comes from Steven Baxter with Wells Fargo.

Steven Baxter, Analyst, Wells Fargo: Yes. Hi. Just a couple of questions on the base of the P and L for this quarter. I guess, we look at the, I guess, the SG and A declined pretty substantially year over year. Wondering if you could comment a little bit on the efficiencies there and what’s driving that.

And I guess also looking at the gross profit side of things, maybe a little bit slower growth this quarter than you’ve seen kind of throughout the balance of the year. Also hoping you could potentially expand a little bit on the trends that we’re seeing on those lines. Thank you.

Britt Bidalone, Chief Financial Officer, McKesson: Yeah. Thanks for the question, Steven. On the expenses, one of the things that’s really driving that is the divestiture that we have in our Canadian business. We divested the Rexall and Well.ca businesses in our third fiscal quarter, so that’s having an impact on the year over year comparison there. From a gross profit perspective, I think that’s more of a mix as well as the divestitures that we had in our international segment.

Overall, we’re really proud and pleased with the operating leverage that we’re generating in the business and that’s showing up at the adjusted operating profit line.

Jenny Dominguez, VP of Investor Relations, McKesson: Question, please.

Conference Operator: And the question comes from Daniel Grosslight with Citi.

Steven Baxter, Analyst, Wells Fargo: Hi, guys. Thanks for taking the question. I wanted to focus on your expectations around GLP-one access programs in the near term. I think you mentioned for 2016, you still expect that to be a strong contributor to growth in RxTS. It seems like there’s a few puts and takes here, perhaps a little more onerous PA terms from an employer plan perspective on the insured side of things.

But also, Lilly and Novo seem to be really expanding their cash pay GLP-one programs via Lilly direct to NovoCare, which obviates the need for for PA. So just curious to get your thoughts on on some of the puts and takes as we think about GLP ones in your cover by meds.

Brian Tyler, Chief Executive Officer, McKesson: I’ll start. So we as you know, we provide prior authorization and and other access solutions, quite frankly. So it’s not just all about prior authorizations. And, you know, our expectation is that as more and more patients become clinically appropriate for the to get started on these products, we will continue to benefit, from from that growth. Right now, the cash pay component, which we would not participate in, you know, is is relatively small.

We think that’s a subset of the population that’s eligible for it. And then the last thing I would say is, obviously, you know, our the services we provide will vary depending on decisions that payers make in terms of how long they wanna go between requiring prior authorizations, how frequently you have to have your prior authorization updated. And so as payers change their policies, it’s some employers choosing for the first time to start to cover weight loss, You know, those are all the dynamics that go into it. When we step back and blend it all together, it delivers the kind of growth that that Britt talked about.

Britt Bidalone, Chief Financial Officer, McKesson: Yeah. Just just to add on to that, again, we finished the year with some very strong momentum, and we feel very confident that our programs continue to resonate. We support all the major GLP-one products and we feel good about the momentum going into FY ’20 ’20 ’6.

Jenny Dominguez, VP of Investor Relations, McKesson: Next question please.

Conference Operator: Our next question comes from Eric Coldwell with Baird.

Daniel Grosslight, Analyst, Citi: Thanks very much. Good afternoon. So I’m curious on prescription tech. It’s very clear from your AOI growth that the revenue growth slowdown forecast in fiscal twenty twenty six really is the 3PL that’s obvious. You normally talk about 3PL being around 50% of revenue.

I’m just curious what kind of a revenue slowdown are you seeing in 3PL, I. E, could we get a better sense on the growth forecast for the higher margin Access Affordability Adherence businesses? That’s it for me. Thanks.

Kevin Calindo, Analyst, UBS: Thanks, Eric,

Britt Bidalone, Chief Financial Officer, McKesson: for that question. We still see good growth in the 3PL business year over year. The rate of growth is what I was referring to. So we had a stronger rate of growth in our fiscal twenty twenty five for the 3PL business. So that rate of growth we do anticipate will slow, although we expect it to be more consistent with what we’ve seen historically.

Overall, we are really feeling good about the access solutions and the growth rate that we’re seeing there, particularly as we come out of a very strong fourth quarter and fiscal twenty twenty five. But it’s really the rate of growth. The rate of growth is still believe solid, but it’s just a slower rate of growth than we had in FY 2025 which was a very strong year. And as we talked about before, it’s really the timing of programs, the launch of products, all of those things go in and drive some variability with our 3PL revenue.

Jenny Dominguez, VP of Investor Relations, McKesson: Question please.

Conference Operator: And the next question comes from Elizabeth Anderson with Evercore ISI.

Jenny Dominguez, VP of Investor Relations, McKesson0: Hi, guys. Thanks so much for the question and congrats on a nice quarter and outlook. I was wondering, you guys obviously have a big role in helping independent pharmacies in a variety of ways, including some of their PBM negotiations. Given some of the changing reimbursement models we’re hearing about from the national change, Has that kind of conversation percolated down to sort of the independent pharmacy customer base, or is it not yet? And sort of what are they they mostly focused on and asking you from from the the reimbursement perspective?

Thanks.

Brian Tyler, Chief Executive Officer, McKesson: Yes. As you know, through our HealthMark program, we include service around reimbursement. We have certainly continued to evaluate and understand the specifics and the mechanics of how some of these alternative reimbursement models work. As of yet, I wouldn’t say there’s been a big behavioral shift, but, it’s something that we’re certainly tracking on. In terms of what, you know, our customers ask us for, they ask us to help them attract patients, marketing programs, etcetera, help make sure their pharmacy is operationally as efficient as can be, help make sure they have consistency of supply and competitive cost, help them stay abreast of, you know, trends that are happening in the marketplace that they can manage their business as best they can, for example, by sharing best practices and growth strategies and drivers that we see throughout the portfolio of our 4,500 plus independent pharmacies.

Jenny Dominguez, VP of Investor Relations, McKesson: We have time for one more question.

Conference Operator: And that question will come from Charles Rhyee with TD Cowen.

Unidentified Speaker: Oh, yeah. Thanks for squeezing me in here. I guess, Brett, maybe just on the guidance, free cash flow guide down from last year. Can you help us bridge where the pieces there? Is it just cash going out for core ventures and for the cancer?

Britt Bidalone, Chief Financial Officer, McKesson: Yeah. The cash flow guidance is is still strong. Historically, it’s it’s above where we’ve trended over the last several years. So we feel really good about the cash flow generation. As I’ve talked about before, this is really a a relation of timing, including the day that the quarter ends on or the year ends on.

We did have a few nonoperational cash flow items that came through at the end of our fiscal twenty twenty five, not really material, but that will also impact the year over year. But we think that 4,400,000,000.0 to $4,800,000,000 of free cash flow is still very strong.

Brian Tyler, Chief Executive Officer, McKesson: Great. Thank you. Thank you everyone for joining our call, and really appreciate your thoughtful questions. Thanks, Justin, for, helping facilitate the the call. McKesson delivered a strong fourth quarter and fiscal twenty twenty five.

We are committed to build on this momentum, drive sustainable growth, and deliver attractive shareholder returns in the years ahead of us. I certainly don’t wanna end this call without expressing my deep gratitude to our team of over 45,000 McKesson employees. It’s their dedication to excellence and their care for our customers and each other that allow us to deliver these kinds of results, and I look forward to delivering more with them in the quarters ahead. Thanks, everybody. Hope you have a terrific evening.

Conference Operator: Thank you. Thank you for joining today’s conference call. You may now disconnect, and have a great day.

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