Earnings call transcript: McKesson’s Q1 2026 results exceed forecasts, stock dips

McKesson Corporation reported its first-quarter fiscal year 2026 earnings, surpassing Wall Street expectations with an earnings per share (EPS) of $8.26 against a forecasted $8.19. The company also reported revenue of $97.8 billion, exceeding the anticipated $95.82 billion. Despite these strong financial results, McKesson’s stock fell 0.81% in after-hours trading, closing at $703.76. According to InvestingPro analysis, McKesson currently shows a GREAT financial health score of 3.11 out of 4, with particularly strong profitability metrics. The platform’s Fair Value calculation suggests the stock may be undervalued at current levels.

Key Takeaways

• McKesson’s Q1 revenue rose 23% year-over-year to $97.8 billion.
• EPS outperformed estimates, reaching $8.26, up 5% from the previous year.
• Stock price fell by 0.81% post-earnings despite positive financial results.
• The company raised its full-year EPS guidance to $37.1-$37.9.
• Significant growth in GLP-1 medication distribution and specialty pharmaceuticals.

Company Performance

McKesson’s performance in the first quarter of fiscal 2026 showcased robust growth, with consolidated revenues increasing by 23% year-over-year. The company’s strategic acquisitions in oncology and ophthalmology, alongside investments in prescription technology solutions, fueled this growth. McKesson’s expansion in its U.S. Oncology Network and specialty distribution centers further cemented its leading position in the pharmaceutical distribution sector. InvestingPro data reveals impressive five-year revenue growth with a CAGR of 9%, while the company maintains strong cash flows that adequately cover its interest payments. For deeper insights into McKesson’s financial health and growth prospects, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.

Financial Highlights

• Revenue: $97.8 billion, a 23% increase year-over-year.
• Earnings per share: $8.26, up 5% from the prior year.
• Adjusted operating profit: $1.4 billion, reflecting a 9% year-over-year growth.

Earnings vs. Forecast

McKesson exceeded market expectations with an EPS of $8.26, compared to the forecasted $8.19, resulting in an EPS surprise of 0.85%. The revenue also surpassed forecasts, coming in at $97.8 billion against an expected $95.82 billion, marking a 2.1% revenue surprise.

Market Reaction

Despite exceeding earnings expectations, McKesson’s stock dropped 0.81% in after-hours trading to $703.76. This dip comes amidst a broader market environment where healthcare stocks have faced volatility. The stock’s current price is closer to its 52-week high of $737.89, indicating strong performance over the past year. Notably, InvestingPro analysis shows McKesson typically trades with low price volatility, with a beta of just 0.5 over the past five years. The stock has delivered impressive returns, with a total return of 18.39% over the past six months. InvestingPro subscribers have access to 16 additional ProTips about McKesson, providing crucial insights for investment decisions.

Outlook & Guidance

Looking forward, McKesson has raised its full-year EPS guidance to a range of $37.1 to $37.9. The company anticipates revenue growth of 11-15% for fiscal year 2026, with significant contributions from its U.S. Pharmaceutical and Prescription Technology Solutions segments. McKesson also plans to repurchase approximately $2.5 billion in shares, demonstrating confidence in its financial health. InvestingPro data highlights the company’s commitment to shareholder returns, having maintained dividend payments for 32 consecutive years with a notable dividend growth of 32.26% in the last twelve months. Management’s aggressive share buyback program further reinforces their confidence in the company’s future prospects.

Executive Commentary

Brian Tyler, CEO of McKesson, stated, "We delivered record consolidated revenues of $97.8 billion, an increase of 23% over the prior year." CFO Britt Vittalone highlighted the role of biosimilars, noting, "We are seeing biosimilars as a steady contributor to our earnings." These statements underscore the company’s strategic focus on driving growth through innovation and market expansion.

Risks and Challenges

• Potential impacts from healthcare policy changes, including Medicaid adjustments.
• Market volatility affecting pharmaceutical distribution channels.
• Supply chain disruptions, particularly in specialty pharmaceuticals.
• Competition in the oncology and ophthalmology sectors.
• Economic uncertainties that could affect consumer spending and healthcare budgets.

Q&A

During the earnings call, analysts inquired about the potential impact of the Rite Aid bankruptcy, to which the company responded with minimal expected effects. Questions also focused on the brand pricing environment and the company’s strategy for continued growth in specialty pharmaceuticals through practice expansion and acquisitions.

Full transcript - McKesson (MCK) Q1 2026:

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

Jenny Dominguez, VP of Investor Relations, McKesson: Thank you, operator. Good afternoon, and welcome, everyone, to McKesson’s first quarter fiscal twenty twenty six earnings call. Today, I’m joined by Brian Tyler, our Chief Executive Officer and Britt Vittalone, our Chief Financial Officer. Brian will lead off, followed by Britt, and then we’ll move to 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 additional information concerning risk factors that could cause our actual results to materially differ from those in our forward looking statements. Information about GAAP, non GAAP financial measures that we will discuss during the webcast, including a reconciliation of those measures to GAAP results, can be found in today’s earnings release and presentation slides. The 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. I appreciate everyone joining our call today. Earlier today, we reported strong fiscal first quarter results, exemplifying the value of our differentiated solutions and our ability to continuously drive progress against our strategic priorities. We delivered record consolidated revenues of $97,800,000,000 an increase of 23% over the prior year.

Adjusted operating profit increased 9% to 1,400,000,000.0 Three of our segments delivered double digit growth in adjusted operating profit reflecting continued momentum across the enterprise. We are executing against our growth commitments we outlined to our shareholders as demonstrated by these first quarter results. The performance in the first quarter and our outlook for the remainder of the year gave us confidence to raise the full year guidance to $37.1 to $37.9 from a previous range of $36.9 to $37.7 Our financial strength reflects our commitment to deliver services with the highest standard of quality, to foster innovation and to collaborate with our customers and partners to ultimately drive forward our mission as a diversified health care services company. I want to focus my remarks today on our strategy and our company priorities. I want to provide you with insights into how we’re driving performance in the near term and positioning McKesson for continued long term growth.

I’ll then hand it over to Britt for a more detailed discussion on the first quarter financial results. I want to start, as I always do, with our focus on people and culture. Everything we achieve is made possible by the dedication and commitment of our 45,000 employees. The initiatives they work on, the problems they solve are complicated, including onboarding large strategic customers and or integrating new businesses. Success in these endeavors relies upon strong collaboration and a cohesive teamwork across our organization.

I’m continually proud to see how our teams consistently come together to achieve our goals and deliver results. We’re committed to taking care of our employees, empowering their growth, and supporting their well-being. In July, we witnessed the devastating floods that struck Central Texas resulting in widespread destruction and tragic loss of life. Our hearts go out to the families and the communities impacted. In difficult moments like these, we stand ready to support each other through initiatives like McKesson Foundation’s Taking Care of Our Own.

In the past fiscal year, we delivered over 700 grants to employees going through various types of hardships. Together as a team, we’re stronger and more resilient to navigate challenges that come our way. Our people, along with our partners, community, and our planet, are the four pillars we focus on. Recently, we published our impact report for fiscal year twenty five that highlights the breadth of our impact and reaffirms our commitment to driving meaningful change across the healthcare landscape. I am quite proud of the progress we’ve made, and we’re committed to leveraging our company’s strengths and areas of expertise to build a healthier world for everyone.

You can find our report on our corporate website. Now let me move on to our two strategic growth pillars, oncology and biopharma services. McKesson is uniquely positioned to bring innovative solutions and services to partners and patients in these areas. We began our journey in oncology over eighteen years ago with the acquisition of Oncology Therapeutic Networks, focusing on specialty distribution in the community based settings. Over the years, we have significantly evolved our portfolio and extended our capabilities to other differentiated and value added services that span across the patient’s journey, including practice management, clinical trial services, and data and insights.

In June, we were pleased to complete the acquisition of a controlling interest in Core Ventures, which is a business and administrative services organization established by Florida Cancer Specialists and Research Institute. With the close of the acquisition, we welcome Florida Cancer Specialists and its providers to the U. S. Oncology Network. This marks an important step forward in our efforts to expand access to exceptional cancer care in local communities, growing the footprint of the U.

S. Oncology Network to approximately 3,300 providers across 700 sites and 30 states. The growth of the U. S. Oncology Network, combined with our strategic investments, has created a flywheel effect across the oncology platform.

It broadens our footprint, including distribution volume and demand for our GPO services, enhances patient care access within the community. With providers practicing on the same electronic health record system, it enables us to generate valuable data and insights. For Florida Cancer Specialists and Core Ventures, integration efforts are well underway, we’re excited about the opportunities ahead to accelerate growth across our oncology platform. Leveraging our leadership in community practice and specialty solutions, we have expanded our value proposition beyond oncology and into other therapeutic areas. In April, we completed the acquisition of a controlling interest in Prism Vision, enabling us to develop a leading retina and ophthalmology platform and further enhance our practice management solutions.

Let me move now to biopharma services and our platform there. In the first quarter, prescription technology solutions delivered double digit growth in revenue and adjusted operating profit. We continue to lead in transforming medication access and affordability. We have built a robust scaled network that digitally and securely connects providers, pharmacists, insurers so they can work together to remove barriers and improve efficiency. We connected we’re connected to over 50,000 pharmacies and approximately 985,000 providers.

The extensive connectivity and reach of our networks are differentiating and enable us to provide commercialization solutions at scale while bringing unique value to each of our stakeholders. In the past quarter, we continued to experience volume growth and prior authorization requests. Our prescription technology solutions team brings over fifteen years of experience transforming the prior authorization process, making it more efficient, more transparent, and more patient focused to help ensure people get the care they need faster. Through our innovative solutions, we’re committed to improving health outcomes and making a meaningful difference for our customers and their patients. Let’s move on to our pharmaceutical distribution business in North America.

These are our core foundational distribution assets in US and Canada. In the first quarter, we saw growth in underlying businesses, supported by solid utilization trends, accelerated growth in categories of specialty pharmaceuticals and continued focus on operational excellence. Our pharmaceutical business services a wide range of customers. One of the channels that we have supported and partnered with for years are community pharmacies. This past July, we hosted our annual IdeaShare Conference, a nationwide event that brought together community pharmacies to drive deeper connections and engagement.

Despite the complexities present in the industry, their presence in the communities they serve is more important than ever. We are committed to helping them navigate this dynamic environment as a partner, providing best in class services, empowering them through innovation, advocacy and tailored solutions for their unique business needs. We’re pleased to see that our Health Mart franchise, a nationwide network of independent pharmacies, ranked highest among brick and mortar chain drugstore pharmacies in a J. D. Power 2025 U.

S. Pharmacy study. To support the success of our customers and the growth of our pharmaceutical business, we continue to invest in our large and scaled distribution network, modernizing our facilities and positioning our operations for long term success. Operating a distribution center at our scale is complex, and we’re implementing automated technologies and and processes in numerous areas across our facilities, including automated storage and retrieval systems and automated picking systems for order fulfillment. These technologies are leveraged across the network to enable improvements in productivity, quality and safety for our teams.

They also enable new processes like the upcoming DSCSA requirements to be effectively managed. We’ve also expanded our cold chain capabilities to support the growing demand for specialty therapies, which often require special handling such as temperature control, ensuring product integrity from the manufacturer to the patient. Our efforts have resulted in nearly double digit growth in cold chain lines year over year. These investments not only strengthen our supply chain resiliency, they also position McKesson as a trusted partner to support future growth. In McKesson Canada, we expanded our dedicated automation group that leads the way towards better health through the automation of medication delivery, resulting in faster and safer treatments.

We’re working closely with pharmacists and health care professionals to better understand their needs and bring forward solutions that leverage technology automation. Now I want to provide a brief update, as to our portfolio actions. Last quarter, we announced our intent to separate the Medical Surgical segment into an independent company. This is a strategic decision that aligns with our enterprise focus capital allocation and portfolio management, and it will enhance the operational focus for both companies. We firmly believe this action will unlock significant value for the medical business and McKesson.

We have a strong track record of executing on large complex transactions like the spin off of Change Healthcare and the divestiture of our European business. We’re confident in our ability to execute on this strategic initiative and maximize shareholder value. We look forward to providing an update on our progress at our upcoming Investor Day event in September. I also want to comment on our Norway business. This week, we entered into a definitive agreement to sell our retail and distribution businesses in Norway.

The transaction is subject to customary closing conditions, including receipt of required regulatory approvals. Norway is the only remaining operating country in Europe. The planned exit of the Norway business will mark the final phase in our strategy of fully divesting our European businesses. As I reflect on the progress across our company priorities, I’m proud of the impact we’ve achieved as a diversified health care services company. We continue to manage the business with discipline and focus while navigating a dynamic market and policy environment.

We remain engaged with policymakers and key stakeholders to evaluate the potential impacts on our business and customers. We’re committed to promoting awareness, fostering collaboration and advocating for changes consistent with our values and our company’s mission. Delivered strong first quarter results underpinned by continued momentum across the segments. I want to again thank McKesson employees for their dedication and contribution to advancing our strategies. We as a team are confident in our ability to carry forward the momentum with strength and focus, deliver meaningful results for our shareholders and accelerate our mission to advance healthcare for all.

Finally, we’re excited to host our Investor Day on September 23, during which we’ll provide an update on the company’s strategic priorities, growth strategies and business outlook. And with that, I’m going to hand it over to Britt for some more financial details. Thank you, Brian, and

Britt Vittalone, Chief Financial Officer, McKesson: good afternoon. Before I turn to our adjusted results, I want to provide two updates. As Brian mentioned in his opening remarks, we are pleased to have entered into a definitive agreement to sell the retail and distribution businesses in Norway. This transaction will complete the exit of our European operations and is subject to customary closing conditions and regulatory approvals. We will classify the assets and liabilities related to Norway as held for sale beginning with our fiscal twenty twenty six second quarter.

The held for sale treatment includes the impact from discontinued depreciation and amortization and our guidance assumes an approximate $0.20 adjusted earnings per diluted share impact. And this is included in our updated full year guidance, which I will speak to in a few minutes. We’ve assumed that this transaction does not close during fiscal twenty twenty six. Next, in our first quarter, we recorded a GAAP only pretax provision for bad debts of $189,000,000 or $140,000,000 after tax within The U. S.

Pharmaceutical segment. This charge represents the remaining trade accounts receivable balances due from Rite Aid prior to its second bankruptcy filing. Remainder of my comments today will refer to our adjusted results, and I’ll start by discussing our first quarter fiscal twenty twenty six results, and then I’ll discuss our fiscal twenty twenty six outlook. Our first quarter results were strong, led by double digit operating profit growth in three of the four segments. This robust performance exhibited across the enterprise reflects continued momentum in the operation, execution against our strategies and disciplined capital deployment, is underpinned by the strength of our balance sheet.

Consolidated revenues in the quarter increased 23% to $97,800,000,000 led by growth in The U. S. Pharmaceutical segment due to increased prescription volumes from retail national account customers, the addition of a strategic account customer at the beginning of the second quarter in fiscal twenty twenty five, growth of GLP-one medications and growth in the distribution of oncology and specialty products. We’ve also now cycled through the impact of the strategic account onboarding. Gross profit was $3,300,000,000 an increase of 7%, a 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, which was partially offset by lower contributions in our International segment as a result of the divestiture of our Canada based Rexall and well.ca businesses at the end of the 2025. Operating expenses decreased 1% to $1,900,000,000 driven by divestitures in our Canadian business and cost optimization initiatives in the Medical Surgical Solutions segment, which were partially offset by increased operating expenses in The U. S. Pharmaceutical segment to support growth including first quarter fiscal twenty twenty six acquisitions.

Kessen continues to deliver efficiency and operating leverage, disciplined focus and the implementation of process innovations and advanced technology, including artificial intelligence. I’d also like to highlight how our automation investments are enhancing outcomes for customers, partners, and employees while driving measurable improvement in operating leverage. Across our pharmaceutical distribution network, we’re strategically allocating capital to scale automation from outbound picking to inbound receiving and replenishment. We have observed distribution centers which have achieved up to 90% automation, serving as a tangible proof point of throughput scalability and operational consistency. These advancements are driving measurable operating leverage.

We also recently opened our largest specialty distribution center in Olive Branch, Mississippi, which is equipped with mobile autonomous robots or cobots that assist associates in the order fulfillment process. These technologies improve productivity, efficiency, and order accuracy while elevating the employee experience by reducing physical strain and minimizing injury risk. These investments are advancing our capabilities and delivering meaningful value to stakeholders. And these are just two of several examples across the enterprise that help to contribute more than four fifty basis points of year over year improvement in our consolidated operating expense to gross profit ratio. Our operating profit was $1,400,000,000 in the quarter, which was an increase of 9%.

Year over year results benefited from growth across our operating segments, including strong oncology and multi specialty volumes from organic growth and recent acquisitions, increased demand for access solutions in our prescription technology solutions segment and benefits from the cost optimization initiatives in the medical surgical solutions side. As a reminder, first quarter fiscal twenty twenty five operating profit included $110,000,000 of gains related to McKesson Ventures equity investments compared to gains of $1,000,000 in the 2026. Excluding the impact of gains related to McKesson Ventures equity investments, operating profit increased 19%. Interest expense was $44,000,000 a decrease over the prior year resulting from effective cash and portfolio management including our derivative portfolio. The effective tax rate in the first quarter was 21.4% compared to 13% in the prior year.

In the 2026, we recognized discrete tax benefit of $23,000,000 compared to a discrete tax benefit of $125,000,000 in the 2025. First quarter diluted weighted average shares outstanding was $125,500,000 a decrease of 4%. The first quarter earnings per diluted share increased 5% to $8.26 Year over year growth was driven by strong operational performance across the business, partially offset by a higher tax rate and pretax gains of $110,000,000 associated with McKesson Ventures equity investments in the 2025. Excluding the gains from McKesson Ventures investments, earnings per diluted share increased 14%. Turning to first quarter segment results, which can be found on Slides seven through 12 and starting with U.

S. Pharmaceutical. Revenues were $90,000,000,000 an increase of 25 driven by increased prescription volumes from retail national account customers and growth in the distribution of oncology and specialty products including contributions from acquisitions. Growth in the quarter included the onboarding of a new strategic customer as discussed previously. Revenues from GLP-one medications were $12,100,000,000 in the quarter, an increase of approximately $3,300,000,000 or 38% when compared to the prior year.

On a sequential basis GLP-one revenue increased 11%. Segment operating profit increased 17% to $950,000,000 driven by growth in core distribution, including higher volumes from retail national account customers and growth in the distribution of oncology and specialty products. Operating profit growth in the quarter also included contributions from the acquisitions of Prism Vision and Core Ventures. These acquisitions advance our strategy in oncology and multi specialty solutions. Although integration work remains, we’re seeing early gains benefiting our differentiated platforms.

In the Prescription Technology Solutions segment, revenues increased 16% to $1,400,000,000 driven by increased prescription volumes in the third party logistics business. Operating profit increased 21% to $269,000,000 driven by higher demand for access solutions including prior authorization services for GLP-one medications. Turning to Medical Surgical Solutions, in the first quarter revenues were $2,700,000,000 an increase of 2% driven by higher volumes of specialty pharmaceuticals. Operating profit increased 22% to $244,000,000 driven by operational efficiencies from cost optimization initiatives. Next, let me address our international results.

Revenues were $3,700,000,000 an increase of 1% resulting from higher pharmaceutical distribution volumes in the Canadian business partially offset by the divestiture of our Canada based Rexall and well.ca businesses completed at the end of the fiscal twenty twenty five third quarter. Excluding the impact of divested businesses, revenues increased 5%. Operating profit was $99,000,000 a decrease of 3%, driven by the divestiture of the Canada based Rexall and well.ca businesses, partially offset by higher pharmaceutical distribution volumes in the Canadian business. Excluding the impact of divested businesses, operating profit was flat. Wrapping up our segment review with corporate.

Corporate expenses were $138,000,000 in the quarter. As a reminder, during the 2025, we had pretax gains of $110,000,000 or $0.62 per share related to equity investments within the McKesson Ventures portfolio. Excluding McKesson Ventures gains in fiscal twenty twenty five and 2026, corporate expenses were 4% lower than the prior year. The decrease was driven by lower opioid related expense and technology costs. Let me turn to cash and capital deployment in the first quarter, which can be found on Slide 13.

We ended the quarter with $2,400,000,000 in cash and cash equivalents. For the first quarter, we had negative free cash flow of $1,100,000,000 which included $189,000,000 in capital expenditures. We used $3,400,000,000 of cash for the acquisitions of Prism Vision and Core Ventures. During the quarter, we completed a $2,000,000,000 bond issuance with tenors of five, seven and ten years, the proceeds of which were used to finance the Core Ventures acquisition. Additionally, we returned $671,000,000 of cash to shareholders, which included $581,000,000 of share repurchases and $90,000,000 in dividend payments.

Moving now to our fiscal twenty twenty six outlook. Our first quarter results represent strong execution against our strategies and growth across our operating segments. The strong start momentum across the enterprise combined with our ongoing focus to deliver shareholder value through the management of our portfolio and alignment to our enterprise strategy gives us confidence in our outlook for fiscal twenty twenty six. Cellular first quarter results combined with our announcement of a definitive agreement to sell our Norway based business underpins today’s increase to our fiscal twenty twenty six earnings per diluted share outlook to a new range of $37.1 to $37.9 For fiscal twenty twenty six, we anticipate revenue growth of 11% to 15% and operating profit growth of 9% to 13% when compared to the prior year. Let me start with a review of our segments.

In The U. S. Pharmaceutical segment, we anticipate revenues to increase 12% to 16%. As a result of strong first quarter performance, we now anticipate operating profits to increase at the high end of the previously provided range of 12% to 16% growth. In the core distribution business, we anticipate continued growth of GLP-one medication.

However, we anticipate this growth may vary from quarter to quarter. During the first quarter, we successfully completed two strategic acquisitions, Prism Vision and Core Ventures. These actions are consistent with our disciplined capital deployment strategy, allocating capital against our differentiated growth platforms such as oncology and multi specialty. These acquisitions will deliver growth in a value creating manner and position us for durable growth in fiscal twenty twenty six supporting our long range targets. The reminder on April 1, we completed the acquisition of a controlling interest in Prism Vision Holdings, a premier provider of general ophthalmology and retina management services.

On June 2, we completed the acquisition of a controlling interest in Community Oncology Revitalization Enterprise Ventures or CORE Ventures, an internal business and administrative services organization established by Florida Cancer Specialists and Research Institute. As I discussed previously, we’re pleased with the first quarter performance for these acquisitions. We continue to 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.

In the Prescription Technology Solutions segment, we anticipate revenues to increase by 8% to 12% and operating profit to increase by 9% to 13%. The higher revenue outlook is due to increased third party logistics volumes and greater demand for our supported products and programs. We anticipate continued contribution from prior authorization services, including those related GLP-one medications to drive increased demand for access and affordability solutions contributing to the growth of the segment. The outlook affirms our confidence in achieving operating profit growth in fiscal twenty twenty six in line with the long term growth rate target. As I previously discussed, the revenue and operating profit trajectory in this segment is not linear and can vary from quarter to quarter driven by several factors which include utilization trends, the timing and trajectory of new product drug launches, the evolution of a product’s program support requirements as it matures, which could result in the shift to other services or a program termination product delays and supply shortages pay requirements including utilization management and formulary strategies the annual verification programs that we provide for our customers that occur in our fiscal fourth quarter and the size and timing of investments to support and expand our product portfolio.

We have scale and breadth of capabilities and connections across multiple channels including biopharma providers, retail pharmacies and payers. Our leading scale of digitally connected solutions is addressing market and patient challenges and access affordability and adherence in delivering growth and value for all stakeholders. In the Medical Surgical Solutions segment, we anticipate revenues and operating profit to increase 2% to 6%. We’re pleased with the solid start to the year and the continued focus and delivery of cost optimization opportunities resulting in operating efficiencies and better alignment with our customers. In the international segment, we anticipate revenues to be approximately a 2% decline to 2% growth and operating profit to increase 3% to 7%.

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 2025. As I mentioned earlier, on 08/04/2025, McKesson entered into a definitive agreement to sell its retail and distribution businesses in Norway. The transaction is subject to customary closing conditions, including receipt of required regulatory approvals. Our fiscal twenty twenty six outlook contemplates contributions related to operations in Norway for the full fiscal year and includes held for sale accounting treatment, adding approximately $0.20 of operating profit to the segment. In the corporate segment, we anticipate expenses to be in the range of $570,000,000 to $630,000,000 When excluding the impact of McKesson Ventures gains in fiscal twenty twenty five and 2026, corporate expenses are roughly flat compared to the prior year, a reflection of efficiency gains and cost discipline across the enterprise.

Turning now to items below the line. We anticipate interest expense to be in the range of $260,000,000 to $290,000,000 and income attributable to non controlling interest to be in the range of $215,000,000 to $235,000,000 The updated interest expense outlook includes the $2,000,000,000 of debt issuance associated with the acquisition of Core Ventures completed in the 2026. We anticipate the full year effective tax rate will be in the range of 17% to 19 with the first half of the fiscal year to be in the range of 17% to 20% and the second half to be approximately 16% to 19%. Wrapping up our outlook with cash flow and capital deployment. We anticipate free cash flow of approximately 4,400,000,000 to $4,800,000,000 Our working capital metrics and 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.

We’re also pleased to announce that in July our Board of Directors approved a 15% increase to our quarterly dividend. These actions demonstrate the confidence that the Board of Directors and management have in the strength of the company and execution of our strategic priorities. Our outlook reflects plans to repurchase approximately $2,500,000,000 of shares in fiscal twenty twenty six. As a result of this share repurchase activity, we estimate weighted average diluted shares outstanding to be in the range of approximately 124,000,000 to $125,000,000 In summary, we delivered outstanding performance in the 2026, a continuation of the strong momentum across the enterprise. The strength and stability in the underlying fundamentals across our businesses including the acquisitions of Prism Vision and Core Ventures give us confidence in our increased outlook.

Our sustained financial performance bolstered by the strength of our financial position and consistent operating execution are leading to compelling value creation for our customers, partners and shareholders. With that, we should move to the Q and A session.

Conference Operator: Thank And our first question will come from Eric Percher with Nephron Research.

Eric Percher, Analyst, Nephron Research: Thank you. Impressive patience on Norway, but that’s not where my question is going to be. I want to ask on RxTS. I understand the discussion of upside this quarter and factors that may be temporary in nature and how difficult it is to predict. Is this now a segment where we should look at the full year guidance and expect that it’s really going to be difficult to find upside to that number to see upward revisions until we get into the back half of the year?

And what is it what elements of the business do you believe this year could drive you towards the upper end of the range ultimately?

Britt Vittalone, Chief Financial Officer, McKesson: Sorry about that. Thank you, Eric, for that question. I think we’re really pleased with the consistency of operating performance in this segment. As I mentioned, are a number of factors that underpin this performance, utilization being one, the success of our programs being another. And I think we’ve seen consistency in that over the last several years.

As we indicated, our continued investment in this business and continued investment in adjacencies to support access adherence and affordability solutions is going to help us continue to sustain, we believe, this growth over the long term growth period. But again, I would just point back to the factors that I talked about. They will help us drive the performance in this business. It will be utilization. It will be the maturity of drugs within our programs.

It will be launch of new products. And our products and services are well positioned as new products and new programs launch.

Conference Operator: And next will be Lisa Gill with JPMorgan.

Lisa Gill, Analyst, JPMorgan: Thanks very much and congratulations on another good quarter. Can we talk about core pharma for a minute? If I just look at the strong results, can you maybe talk about the cadence? Britt, I appreciated you calling out Rite Aid and what was excluded. But are you seeing any impact from the store closings or anything else from a negative perspective on Rite Aid?

And then lastly, if you can just maybe walk us through how to think about maybe some of the cadence. I know that with the acquisitions and the operating profit growth that you talked about, is there anything we should think about as we go through the quarters?

Britt Vittalone, Chief Financial Officer, McKesson: Yes. Thanks for the question, Lisa. Maybe I’ll talk about a couple of things, but I’ll start with Rite Aid. As we’ve talked about in prior calls and prior settings, the impact of Rite Aid’s second bankruptcy on our operations and our operating profit growth is immaterial and it’s we don’t believe it’s going to have an impact on our operations in fiscal twenty twenty six. As we think about the business, The U.

S. Pharma business, we are really pleased with the underpinnings, the utilization, the onboarding of new customers that we’ve now cycled through. That’s been an important factor for us. The continued growth in specialty and oncology as well as adding providers to both of those platforms and certainly the acquisitions that we talked about. And again, I just remind you that we anticipate that these acquisitions will add about 6% to 7% to the operating profit growth rate this year.

So we’ve got what I would say are a lot of really good momentum and factors going into this good stable utilization. There’s a con continued performance of specialty and oncology. There’s a continued addition of providers to the network, the acquisitions. All of these things are continuing to help build that momentum within this business.

Jenny Dominguez, VP of Investor Relations, McKesson: Next

Conference Operator: will be Charles Rhyee with TD Cowen.

Charles Rhyee, Analyst, TD Cowen: Maybe if I can ask a question on RxTS. Obviously, a strong performance in the quarter. You raised the revenue guide. But if I look, right, I think the outlook for the rest of the year in terms of operating income growth remained the same. Anything that we should think about as we think out through the rest of the quarters here?

Maybe any change in your expectations related GLP-1s? And if you could just remind us of any of these recent prior authorization initiatives undertaken by insurers had any impact on the segment? Thanks.

Britt Vittalone, Chief Financial Officer, McKesson: Thanks for your question, Charles. I’ll start and then I’ll let Brian answer that last question. Again, we’re really pleased with the performance in the quarter as both Brian and I talked about. Operating profit was driven by the success of our prior authorization programs, particularly around the GLP-1s. But non GLP-one programs also performed quite well.

In terms of the revenue, you know, in the quarter, we saw increased revenue from 3PL, and this was really around the success of products and programs that we service. And so 3PL revenue, which we’ve talked about before, can be quite lumpy from quarter to quarter, but it was strong in the first quarter. So I think we’re pretty pleased with the progression of the business and the momentum of the business underpinned again by the strength of our access and affordability solutions, including prior authorizations for GLP-1s.

Brian Tyler, Chief Executive Officer, McKesson: Yeah. I would just we’re very pleased with how the business is performing. You know, we’re more or less right where we thought we would be at this point in the year. I think the last question that you asked, Charles, was just related to have we seen any behavior changes around prior off policies. And I would say for the most part, no.

I think things have been have been a little bit steady. There was, one payer that made a decision to prefer one product over another in their portfolio. But, from our perspective, you know, it’s part of the benefit of having both programs is that prior off mix shift from one program sponsor to another, but our overall prior off volumes remains good.

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

Conference Operator: And next will be Allen Letts with Bank of America.

Allen Letts, Analyst, Bank of America: Good afternoon. Thanks for taking the questions. There’s been several potential changes to pharmaceutical market. Brand price increases in July maybe coming in a little bit higher than expectations. Then you have potential changes just to manufacturers, distributors, pharmacies around tariffs and concerns around tariffs and then generic pricing around cost plus models.

Is anything going on around those items that are different from your expectations? Or is there anything to comment specifically about those things as we move into the back half of the year? Thanks.

Britt Vittalone, Chief Financial Officer, McKesson: Thanks for your question, Alan. I’ll start and then Brian can add on. In terms of brand pricing, you know, we’re not seeing anything outside of what we’ve seen over the last several years in terms of the cadence and, you know, brand pricing is right in line with our expectations. So we’re not seeing anything different from from that end. In terms of generics, we are seeing good performance from our sourcing programs.

We feel that we’re well positioned in the marketplace there. We’re not seeing anything unusual in the generics pricing environment as well. So again, these are good underpinnings that are supporting the success in the growth within the business. We’re not seeing anything unusual at this point.

Brian Tyler, Chief Executive Officer, McKesson: As to your question on the tariffs as it relates to the pharmaceutical industry, I mean, it’s been obviously a little bit volatile, and I would say we’re still in a bit of an uncertain time where this all settles down. But but what we know about tariffs is represented in the guidance that we have, we have provided to you. And I would remind everybody that, you know, I think COVID highlighted this quite well that despite all the challenges the external world had, the pharmaceutical supply chain in totality tends to have, enough inventory to get you through these periods. So I would think that tariffs would would take a little while to play into the economics.

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

Conference Operator: And next will be Daniel Grosslight with Citi.

Allen Letts, Analyst, Bank of America: Hi, guys. Thanks for taking the question, and congrats on another strong quarter here. I was hoping you could touch on biosimilar adoption and any acceleration in benefits that you’re getting from that the bottom line, particularly in the Part B channel and specifically within retina with Prism closing. And on the Part D channel, we’ve obviously seen a rapid adoption of STELARA Biosimilars. I’m curious how that is impacting your bottom line at all and how the, in sourcing by PBMs, by Caremark specifically impacts you guys?

Thanks.

Brian Tyler, Chief Executive Officer, McKesson: Thanks for the question. Obviously, you know, the big two recent biosimilar launches were really in Part D, which was HUMIRA and STELARA. And those, while slowing down, you know, revenue, don’t really have much of an impact in terms of materiality on the bottom line. Obviously, the channel that these products, these biosimilars launch into matters for us. And part b, particularly part b oncology, is our most effective channel.

Obviously, we’re excited about the EYLEA and the biosimilar launches that are are happening in the retina space. But I would remind everyone, this was a quite recently closed closed deal. So the good news in that story is to play out ahead of us.

Britt Vittalone, Chief Financial Officer, McKesson: The only thing that I might add there is on biosimilars. We have talked about this for many, many quarters now that there’s this is a great long term opportunity for distributors, for providers, also for patients. We are seeing this as a steady contributor to our earnings. It’s another building block within the segment. And so we’re not seeing anything in terms of material gains or increases in any quarter, but we are seeing this as a steady contributor to the growth of the segment.

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

Conference Operator: And next will be Brian Tanquilut with Jefferies.

Brian Tanquilut, Analyst, Jefferies: Hey, good afternoon guys and congrats on the quarter. Maybe, Brett, as I think about OpEx down year over year, obviously, some moving pieces there with the Norway sale and incoming acquisitions. But is there any way you can talk about the trajectory there or to quantify how some of the tech and automation initiatives could impact OpEx in the coming years? Thanks.

Britt Vittalone, Chief Financial Officer, McKesson: Yeah. Brian, thanks for that question. You know, we’ve actually been talking about our leverage ratios for some time now. If you you wind the clock back even five years ago, we we started on this journey around our our strategy, starting with costs first and getting a lot of discipline and focus on that. Over time, you know, we what we’ve been able to do is to put more efficiencies, automation within distribution centers, within other parts of our business.

And I think what we’re seeing now is just a a really good set of disciplines, automations, and leverage that’s happening organically across the company now. You know, we both Brian and I talked about a couple of examples where we’re seeing that within our distribution network, but there are just several examples across the company where we are implementing technology, we’re implementing improved processes to drive just better cost. And so if you look at the operating expense leverage over a long period of time, it has been improving, and I think this is just another quarter where that’s an example of it.

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

Conference Operator: And next will be Elizabeth Anderson with Evercore ISI.

Elizabeth Anderson, Analyst, Evercore ISI: Hi, guys. Good afternoon. Thanks for the question. I know it’s early days in terms of FCS and Prism, but can you talk about whether you’ve had sort of the time to dig in and think about like the broader like longer term strategy? Like, obviously, they consolidate within their own if you will.

But, you know, are there broader platform things that you can sort of cross that can run across both of those or across other ologies that you’re in and kind of have a broader? Is that sort of if you could just talk a little bit more about that broader long term strategy there, on the MSO side,

Lisa Gill, Analyst, JPMorgan: that would be great. Thanks.

Brian Tyler, Chief Executive Officer, McKesson: Sure. I mean, look, we have a very mature, very differentiated, MSO offering in in US oncology, and we’ve been at that strategy for nearly two decades. We have just, you know, recently expanded into the retina ophthalmology with the acquisition of Prism, which we very much view as a platform. And our vision at this point in time that we would continue to not exactly run the same playbook as as US oncology, but to continually over time, the value add, expand the services, continue to solve problems, and make these practices more productive and effective in in the retina space. They run on different IT platforms today, and we think that that is strategically strategically the right decision because the complexity and needs of the practices are different.

And so you want a fit for purpose solution to each of those. Now as tools and technologies and and particularly AI and such begins to roll out, we would certainly hope we would find some complimentary, you know, transfer of knowledge, assets, insights across those two platforms, but it’s not key to the strategy today. It would be upside to the to the thesis for for getting into that space.

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

Conference Operator: And next will be Erin Wright with Morgan Stanley.

Jenny Dominguez, VP of Investor Relations, McKesson0: Great. Thanks. So I wanted to circle back on MSN, and I know you’ve talked about this before, but just any changes how you’re thinking about that, the impact across kind of U. S. Oncology as well as other businesses.

And just your competitor talked about kind of an active effort in DC and recognizing sort of, you know, the overall impact of of what could happen on that front. But any change in terms of how you’re thinking about how that could play out?

Brian Tyler, Chief Executive Officer, McKesson: You know, I I don’t think there’s any change, and we have talked in previous calls about about the community setting being the lowest cost, highest quality, most accessible, and then anything that would incentivize care to move out from there, you know, would probably be overwhelmed by the additional health care costs that occur when it when that care takes place in a higher cost setting. Look. It’s still very early in terms of MFN. I mean, letters just came out on July 31, and I think there are lots of facts that will will still be necessary for us to see to really begin to think in any real way and what the impacts may be. And we do expect that, you know, this will play out over a somewhat long time horizon.

It’s not like in the sixty days this is implemented. And in sixty days, we’ll know how manufacturers are thinking about this. We are currently and have been actively engaged with legislature, the administration, manufacturers, customers, and and consistently advocating and educating educating around the fact that we need to keep the community setting vibrant and healthy, and this is where the care should best take place for the totality of US health care costs and for the totality of quality of care and accessibility for Americans. And we think that message resonates.

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

Conference Operator: And next will be Steven Baxter with Wells Fargo.

Allen Letts, Analyst, Bank of America: Hi. Thanks for the question. It looks like there could be some upward pressure on the uninsured rate going into 2026 coming from the individual market and the Medicaid end market. I was wondering if you could speak to how impactful you think those changes may or may not be on demand and maybe how the company is budgeted for them in the back half of the year, particularly for The US pharma segment? Thank you.

Brian Tyler, Chief Executive Officer, McKesson: I think you’re referring to the big beautiful bill and the trillion dollar cuts to Medicaid over the coming decade. By my, you know, back of the envelope math, health care will cost The US roughly $80,000,000,000 or 80,000,000,000,080 trillion dollars over the next decade in totality, adjusting for inflation growth, what have you. And so a trillion is a little more than 1%. So I don’t think you know, our expectation is that it’s not going to be dramatic. It’s not going to be material.

It’s spread over a long period of time. It’s delayed in its start. And and, you know, I think if you try to look back historically to when coverage rates were akin to what people are forecasting they might be, you still find people getting care. I mean, people who need care still consume care, maybe uncompensated care, maybe care in different settings, but they tend to still get that care.

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

Conference Operator: And next will be George Hill with Deutsche Bank.

Charles Rhyee, Analyst, TD Cowen: Hey. Good afternoon, guys. Brett, I’m wondering if we can pull kind of the guide apart a little bit more because you’ve got the 20% the $0.20 guidance increase, which seems like a lot of that is tied to the Norway sale and you’re at the high end of the AOI range for U. S. Pharmaceutical.

Should the implication be that, I guess, either PTS or Medical might come in at the low end of the guidance ranges that you guys are thinking about, given that I would have thought the raise would have been a little bit higher and I recognize that there’s a little bit of an interest offset. So I guess, I just kind of I’d be interested to hear you talk about like how you’re thinking about the other two segments and if there’s anything else we should consider or if there’s any other one time items to be expected in the balance of the year? Thanks.

Britt Vittalone, Chief Financial Officer, McKesson: Thanks for your question, George. Let me try to answer that for you. If you recall, we raised guidance in the middle of the quarter, and that was a reflection of the strength of the operating performance that we saw up to that time, that we were confident in for the rest of the fiscal year. The 20¢ raise that we’re doing now is specifically to the sale of Norway and the impact of the held for sale accounting. We have not made changes to, any changes to the segment guidance for the medical or for the Rx Technology Solutions segment.

So we still feel very good about the guidance that we gave you there. The performance in the first quarter was solid and we feel good about that guidance and haven’t changed it. In terms of The U. S. Pharmaceutical guidance, certainly part of our thinking when we raised the guidance was the operational performance that we were seeing in that segment.

And that continued through the end of the first quarter. So again, we’re one quarter in. We feel really good about the performance across the company. We feel really good about the performance in our US pharmaceutical segment, and that’s why we indicated the higher end of the range for that particular segment.

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

Conference Operator: Certainly. That question will come from Michael Cherny with Leerink Partners.

Jenny Dominguez, VP of Investor Relations, McKesson1: Afternoon, and thanks for squeezing me in. Specialty has been, obviously, the biggest growth driver for you in the space. As you think about your specialty growth opportunity, how much of it do you think is you growing in line with above the market? How much of it is your customers growing? Are you taking share?

Anything more you can do to bifurcate, the specialty growth so we can understand, how durable it is would be greatly appreciated. Thanks.

Brian Tyler, Chief Executive Officer, McKesson: First, I’d say we’re seeing good specialty growth across all of our segments. I mean, hospital segment, retail, segment, and certainly in our oncology segment. And our I think, you know, as demonstrated by this quarter, quite frankly, we think we’re getting the good the good organic growth that exists in that market complemented by expanding practices through recruiting additional physicians. I bought adding adding smaller practices to existing practices, and in the case of FCS acquiring, you know, quite large practice. And that’s been the formula and the strategy over the last years, and I think the performance in this quarter shows the power of that strategy.

Okay. Well, I wanna thank everyone again for joining the call. Thank you for the, thoughtful questions. Thank you to our operator for facilitating the call. McKesson is off to a strong start in fiscal twenty six.

The fundamentals of our business remain strong. Our strategy is delivering results. We continue to fulfill our commitments to our shareholders by driving sustained momentum. We fundamentally believe we’re positioning the business for continued long term growth. I just want to end by saying how proud I am to work alongside our 45,000 employees to advance our mission.

I look forward to sharing more about our progress at our Investor Day in September. Thanks again, everybody. I hope you have a terrific evening.

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

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