McKesson Corporation Q2 FY2026 earnings call

Management Statement and Operational Highlights

• Strategic Growth Pillars: Focus on oncology and multispecialty and biopharma services. The oncology and multispecialty segment has market-leading distribution breadth and capabilities in specialty medications, including cell and gene therapies. The biopharma services platform combines tech-driven patient support, prior authorization, and logistics to improve access and affordability of medicines.
• Investments and Automation: Made significant investments in automation in the North American Pharmaceutical segment, such as order storage retrieval systems, improving operating efficiency and customer experience.
• Community and Employee Care: Participated in Community Impact Days and Annual Wellness Day to support communities and employee well-being.
• Acquisitions and Partnerships: Acquisitions of PRISM Vision and Core Ventures in the oncology and multispecialty segment, and collaboration with Blood Cancer United to strengthen cancer care and clinical trial access.

Segment Performance

• North American Pharmaceutical: Revenues were $86.5 billion, an increase of 8% year-over-year. Segment operating profit increased 13% to $851 million. Revenues from GLP-1 medications were $13.2 billion in the quarter, an increase of approximately $2.6 billion or 24% compared to the prior year.
• Oncology and Multispecialty: Revenues increased 32% to $12 billion, driven by strong provider and specialty distribution growth, including contributions from acquisitions completed in the first quarter of fiscal 2026. Operating profit increased 71% to $397 million. The acquisitions of PRISM and Core Ventures contributed approximately half of the segment operating profit growth in the quarter.
• Prescription Technology Solutions: Revenues increased 9% to $1.4 billion, driven by increased prescription volumes across our third-party logistics and technology services businesses. Operating profit rose 20% to $261 million, reflecting increased demand for access solutions, including prior authorization services for GLP-1 medications.
• Medical-Surgical Solutions: Revenues were $2.9 billion, flat compared to the prior year. Operating profit increased 2% to $249 million, driven by operational efficiencies from cost optimization initiatives, partially offset by lower contributions related to illness season products and testing.

Guidance

• Raised adjusted earnings per diluted share to $38.35 to $38.85 for fiscal 2026, building on the $0.80 increase announced at Investor Day in September.
• For fiscal 2026, anticipate revenue growth of 11% to 15% and operating profit growth of 12% to 16%.
• North American Pharmaceutical: Anticipates revenue increase of 10% to 14% and operating profit growth of 5% to 9%.
• Oncology and Multispecialty: Anticipates revenue growth of 27% to 31% and operating profit growth of 49% to 53%, with acquisitions contributing approximately 30% to 34% to operating profit growth.
• Prescription Technology Solutions: Anticipates revenues increase of 9% to 13% and operating profit growth of 13% to 17%.
• Medical-Surgical Solutions: Anticipates revenue and operating profit at the low end of 2% to 6% growth due to lower illness season product volumes.

Risks

• Market conditions and regulatory changes could impact business performance.
• Variability in illness season product volumes affecting the Medical-Surgical Solutions segment.
• Timing and severity of illness seasons can drive variability in quarterly and annual results.

Q: Lisa Gill from JPMorgan asked about margin profile in Prescription Technology Solutions and sequential quarters.

A: Britt Vitalone responded that there's good mix in Rx technology, with growth in technology services components like new products and prior authorization services for GLP-1. Anticipates higher investments in the second half of the year.

Q: Brian Tanquilut from Jefferies asked about oncology and multispecialty beat in the quarter.

A: Britt Vitalone replied that most nonrecurring gains were known and included in guidance, with acquisitions contributing and organic business growing in line with long-term guidance.

Q: Elizabeth Anderson from Evercore ISI asked about health system strength.

A: Brian Tyler mentioned strong performance with market-leading share in the health system business.

Q: Charles Rhyee from TD Cowen asked about Pharma segment guidance.

A: Britt Vitalone explained drivers like a new strategic customer onboarded in the second quarter of fiscal 2025 and exit of Canada-based businesses in the prior year.

Q: Daniel Grosslight from Citi asked about cash pay channel impact on RxTS.

A: Brian Tyler stated that direct-to-patient pharmacy is not new, and small population eligible, so limited impact on prior authorization business. McKesson has tools to support patients and is engaged with policymakers.

Q: Allen Lutz from Bank of America asked about SG&A and gross profit trend.

A: Britt Vitalone mentioned exit of Canada-based businesses and focus on efficiency and technology-driven modernization. Brian Tyler added that investments in automation and digital technologies lead to such results.

Q: Erin Wilson Wright from Morgan Stanley asked about U.S. oncology rationalization and PRISM progress.

A: Britt Vitalone said market decisions are nonrecurring, and PRISM is progressing well with expansion like adding Spokane Eye Clinic.

Q: Steven Valiquette from Mizuho Securities asked about acquisition accretion.

A: Britt Vitalone stated acquisitions are in line with guidance, PRISM slightly ahead, and both contributing to operating profit growth.

Q: George Hill from Deutsche Bank asked about Drug Supply Chain Security Act impact.

A: Brian Tyler said successful implementation with few disruptions, adding to service value but not a material driver of market changes.

Q: Michael Cherny from Leerink Partners asked about RxTS mega trends.

A: Brian Tyler mentioned streamlining manual processes and looking for other healthcare problems to apply similar solutions using existing assets.