MCKESSON CORP Q4 FY2025 earnings call

Management Statement and Operational Highlights:

• Strategic Acquisitions: Completed acquisition of PRISM Vision and pending acquisition of Core Ventures to enhance Oncology and other specialties, empowering community-based providers.
• Core Distribution Capabilities: Strengthened through technology and infrastructure investments, with new customer onboarding.
• Enterprise Initiatives: Use of technology, automation, and AI to modernize the enterprise and improve operational efficiencies.
• People and Culture: Investment in training and skill development for employees to drive innovation and efficiency.
• Biopharma Services: Prescription Technology Solutions had double-digit growth in adjusted operating profit, helping patients save over $10B on medications.
• Disciplined Portfolio Management: Intent to separate Medical Surgical segment into an independent company to focus capital on growth pillars like Oncology and Biopharma Services.

Segment Performance:

• U.S. Pharmaceutical: Revenues $83.2 billion, up 21% y-o-y. Segment operating profit increased 17% to $1.1 billion, driven by increased prescription volumes from retail national account customers and growth in specialty product distribution.
• Prescription Technology Solutions: Revenues $1.3 billion, up 13% y-o-y. Operating profit $285 million, up 34% y-o-y, due to increased prescription transaction volumes and access solutions.
• Medical Surgical Solutions: Revenues $2.9 billion, up 1% y-o-y. Operating profit $285 million, up 15% y-o-y, impacted by lower primary care volume and customer mix shifts but benefited from cost optimization.
• International: Revenues $3.5 billion, down 2% y-o-y. Operating profit $102 million, up 9% y-o-y, due to divestiture of Canada-based Rexall and Well.ca businesses.
• Corporate: Expenses $165 million, down 15% y-o-y, with lower environmental reserve and higher interest income.

Guidance:

• Fiscal 2026 outlook: Revenue growth 11%-15%, operating profit growth 8%-12%. EPS $36.75-$37.55.
• U.S. Pharmaceutical: Revenue and operating profit +12%-16%, including contributions from PRISM Vision (contributing $0.20-$0.30 EPS) and Core Ventures (contributing $0.40-$0.60 EPS).
• Prescription Technology Solutions: Revenue +4%-8%, operating profit +9%-13%, driven by access and affordability solutions.
• Medical Surgical Solutions: Revenue and operating profit +2%-6%.
• Free cash flow $4.4B-$4.8B, with plans to repurchase ~$2.5B of shares.

Risks:

• Medicare Part B MFN Impact: Uncertainty around potential impact on ASPs and reimbursement, but management believes community-based care is critical and impact may not be material.
• Tariffs: Monitoring tariff landscape, but guidance incorporates current understanding and strategy to diversify sourcing across businesses.

Q: Kevin Caliendo asks about Medicare Part B MFN impact.

A: Brian Tyler states uncertainty and emphasizes community-based care's importance.

Q: Lisa Gill asks about tariffs.

A: Brian Tyler and Britt Vitalone discuss monitoring tariffs and diversified sourcing.

Q: Allen Lutz asks about urgency in biopharma services.

A: Brian Tyler and Britt Vitalone talk about strategic alignment and capital deployment.

Q: Stephen Baxter asks about SG&A decline and gross profit.

A: Britt Vitalone explains divestitures and mix impacts.

Q: Daniel Grosslight asks about GLP-1 access programs.

A: Brian Tyler and Britt Vitalone discuss GLP-1 growth and access solutions.

Q: Eric Coldwell asks about prescription tech growth.

A: Brian Tyler talks about 3PL growth rate.

Q: Elizabeth Anderson asks about independent pharmacy reimbursement.

A: Brian Tyler discusses Health Mart program and customer needs.

Q: Charles Rhyee asks about free cash flow guidance.

A: Britt Vitalone explains cash flow timing and strength.