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MCKESSON CORP (MCK)·Q1 2026 Earnings Summary

Executive Summary

  • Strong Q1 FY26: Revenue $97.83B (+23% y/y) and adjusted EPS $8.26 (+5% y/y); GAAP EPS $6.25 declined $0.75 due to a $189M Rite Aid-related bad debt provision in U.S. Pharmaceutical .
  • Broad-based operating momentum: Adjusted operating profit +9% to ~$1.42B, with three segments delivering double‑digit adjusted operating profit growth; GLP‑1 revenues rose to $12.1B (seq +11%) .
  • Guidance raised: FY26 adjusted EPS lifted to $37.10–$37.90 (from $36.90–$37.70), including ~$0.20 of accretion from held‑for‑sale accounting for the announced Norway exit; U.S. Pharma AOI now guided to the high end of +12–16% .
  • Strategic catalysts: Closed PRISM Vision (ophthalmology) and Core Ventures (FCS oncology MSO), expanded oncology/specialty footprint; dividend raised 15% to $0.82; definitive agreement to sell Norway retail/distribution businesses .

What Went Well and What Went Wrong

What Went Well

  • U.S. Pharmaceutical outperformance: Segment revenue +25% to $90.0B; adjusted segment operating profit +17% to $950M, driven by retail national account volume, oncology/specialty growth, and contributions from PRISM/Core .
  • GLP‑1 and access/affordability tailwinds: GLP‑1 revenue reached $12.1B (+38% y/y); RxTS operating profit +21% to $269M on higher demand for access solutions (e.g., prior authorization) .
  • Operating leverage and automation: CFO highlighted “more than 450 bps” y/y improvement in consolidated OpEx-to-gross profit ratio, aided by high-automation distribution centers and robotics, supporting 9% adjusted operating profit growth .

Management quotes:

  • “We delivered record consolidated revenues of $97.8 billion, an increase of 23% over the prior year… we are raising the full year guidance to $37.1 to $37.9” — CEO Brian Tyler .
  • “We have observed distribution centers which have achieved up to 90% automation… driving measurable operating leverage” — CFO Britt Vitalone .

What Went Wrong

  • GAAP EPS decline from one‑time credit event: GAAP EPS fell to $6.25 (‑11% y/y) due to a $189M pre‑tax provision for Rite Aid bankruptcy; excluded from adjusted results .
  • Negative free cash flow in Q1: Free cash flow was ‑$1.11B on ‑$918M CFO and $3.4B acquisition outflows (PRISM/Core) versus strong Q4 cash generation seasonality .
  • International pressure: Adjusted International operating profit declined 3% y/y in Q1 on Canada retail divestitures, partly offset by Canadian distribution strength .

Financial Results

Consolidated results and vs S&P Global consensus

MetricQ3 2025Q4 2025Q1 2026
Revenue (Actual, $B)95.29 90.82 97.83
Revenue (Consensus, $B)*95.8694.2096.34
Adjusted EPS (Actual, $)8.03 10.12 8.26
EPS (Consensus, $)*7.999.838.15
GAAP Diluted EPS (Actual, $)——6.25
  • Q1 beat: Revenue +$1.49B (+1.5%) and EPS +$0.11 (+1.3%) vs S&P Global consensus; strength from U.S. Pharma volume, GLP‑1, and oncology/specialty mix; adjusted EPS growth partially offset by higher tax rate and lapping prior‑year Ventures gains .
  • Prior quarters: EPS beats in Q3/Q4; revenue missed in Q3/Q4 (Q4 particularly) as comps and timing affected reported top‑line vs models .
  • Values retrieved from S&P Global.

Segment performance – Q1 FY26 vs Q1 FY25

SegmentRevenue ($B) Q1 FY25Revenue ($B) Q1 FY26Adj. Op Profit ($M) Q1 FY25Adj. Op Profit ($M) Q1 FY26Adj. Op Margin (%) Q1 FY25Adj. Op Margin (%) Q1 FY26
U.S. Pharmaceutical71.72 89.95 815 950 1.14 1.06
Prescription Technology Solutions1.24 1.43 223 269 17.97 18.76
Medical‑Surgical Solutions2.64 2.70 200 244 7.59 9.03
International3.69 3.74 102 99 2.76 2.65

KPIs and cash/capital

KPIQ3 2025Q4 2025Q1 2026
GLP‑1 Revenue ($B)10.9 10.9 12.1
Free Cash Flow ($B)-2.60 7.50 -1.11
Share Repurchases ($M)827 300 581
Dividend/Declared (per share)n/a$0.71 $0.71 declared; new rate $0.82 announced
Rite Aid Bad Debt (pre‑tax, $M)——189
Effective Tax Rate (%)23.9 13.0 21.4

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Adjusted EPSFY26$36.90 – $37.70 $37.10 – $37.90 Raised
EPS Accretion from Norway HFSFY26—~+$0.20 included New / Added
U.S. Pharma AOI growthFY26+12% to +16% (range) High end of +12% to +16% Raised (qualitative)
RxTS Revenue growthFY26+4% to +8% (implied slower 3PL) +8% to +12% (higher 3PL) Raised
RxTS AOI growthFY26+9% to +13% +9% to +13% Maintained
Medical‑Surgical Rev/AOI growthFY26+2% to +6% +2% to +6% Maintained
International AOIFY26Flat to -5% +3% to +7% Raised
Corporate Expenses ($M)FY26570 – 630 570 – 630 Maintained
Interest Expense ($M)FY26255 – 275 260 – 290 Raised (expense)
NCI Income ($M)FY26215 – 235 215 – 235 Maintained
Effective Tax RateFY2617% – 19% 17% – 19% Maintained
Free Cash Flow ($B)FY264.4 – 4.8 4.4 – 4.8 Maintained
Share Repurchases ($B)FY26~2.5 ~2.5 Maintained

Earnings Call Themes & Trends

TopicQ3 2025 (Prior-2)Q4 2025 (Prior-1)Q1 2026 (Current)Trend
Automation & OpEx leverageEmphasis on operating leverage, data/analytics investments Cost optimization in MedSurg driving efficiencies; strong leverage >450 bps y/y OpEx-to-gross profit improvement; 90%‑automated DC proof points Improving
GLP‑1 & Access SolutionsRxTS growth from prior auth and access; GLP‑1 supportive Strong annual verification season; prior auth volumes +15% GLP‑1 revenue $12.1B; prior auth demand solid; payer policy steady Growing, variable q/q
Oncology/Specialty StrategyExpanding USON; PRISM signed (retina) Reinforced oncology growth; Core Ventures pending Closed PRISM/Core; USON ~3,300 providers; retina platform build-out Accelerating
Medical-SurgicalSoft illness season; optimization plan underway Intent to separate segment; cost savings delivered Separation plan reaffirmed; guidance maintained Stabilizing
Regulatory (MFN/IRA)IRA/macro watched MFN headlines; advocacy for community oncology MFN early; advocacy ongoing; minimal near-term impact assumed Uncertain, monitored
Tariffs & Supply Chain—Tariffs embedded in guidance; diversified sourcing Tariffs dynamic but manageable; buffer inventory in chain Managed
Biosimilars——Part B oncology most impactful; retina biosims a future tailwind; steady earnings contribution Gradual tailwind

Management Commentary

  • Strategy and outlook: “We delivered record consolidated revenues… we are raising the full year guidance to $37.1 to $37.9” — CEO Brian Tyler .
  • U.S. Pharma drivers: “Revenues were $90B… GLP‑1 revenues were $12.1B… operating profit increased 17%… contributions from the acquisitions of PRISM and Core Ventures” — CFO Britt Vitalone .
  • Operating leverage: “Distribution centers… up to 90% automation… driving measurable operating leverage” — CFO .
  • Norway exit impact: “Held-for-sale treatment… assumes ~+$0.20 adjusted EPS… transaction not assumed to close in FY26” — CFO .
  • Rite Aid provision: “GAAP‑only pre‑tax provision for bad debts of $189M… related to Rite Aid… excluded from adjusted results” — CFO and press release notes .

Q&A Highlights

  • RxTS cadence and upside: Management reiterated steady growth drivers (utilization, program mix, launches); 3PL can be lumpy and drove higher revenue outlook, while AOI guide unchanged .
  • U.S. Pharma cadence & Rite Aid: Bankruptcy impact “immaterial” to FY26 operations; momentum from new customers, specialty/oncology, and acquisitions adds 6–7% to segment AOI growth .
  • Tariffs/brand pricing/generics: No unusual trends vs expectations; diversified sourcing limits tariff risk; guidance reflects current tariff view .
  • Biosimilars: Part B oncology is most beneficial channel; retina biosimilars (e.g., EYLEA) are a prospective positive; contributions are steady rather than step‑function .
  • MFN/Policy: Early days; continued advocacy to keep community oncology vibrant; no immediate model changes .
  • Guidance bridge: EPS raise this quarter tied to Norway HFS accounting; segment guides otherwise maintained, U.S. Pharma bias to high end .

Estimates Context

  • Q1 FY26 vs S&P Global: Revenue $97.83B vs $96.34B*, beat ~1.5%; Adjusted EPS $8.26 vs $8.15*, beat ~$0.11. Beat driven by U.S. Pharma volume (retail national accounts), GLP‑1 growth, and oncology/specialty distribution; higher tax rate and lapping prior‑year Ventures gains tempered EPS growth .
  • Prior quarters: Q4 FY25 EPS beat and revenue miss; Q3 FY25 EPS slight beat and revenue slight miss, reflecting timing/program mix and seasonal dynamics .
  • Implications: Raised FY26 adjusted EPS guide to $37.10–$37.90 supports upward estimate revisions; U.S. Pharma AOI bias to high end and RxTS revenue raise suggest positive intra‑year estimate momentum, partially offset by higher interest expense and normalized tax .
  • Values retrieved from S&P Global.

Key Takeaways for Investors

  • Execution remains robust: Enterprise delivered 23% revenue growth and 5% adjusted EPS growth despite a GAAP‑only credit hit; automation and scale are driving sustained operating leverage .
  • Oncology/specialty flywheel strengthening: PRISM and Core Ventures expand differentiated platforms; U.S. Oncology Network now ~3,300 providers, enhancing distribution, GPO, data, and clinical trial synergies .
  • GLP‑1 a durable but variable tailwind: $12.1B Q1 revenue; access solutions remain in demand; expect quarterly variability but favorable y/y trajectory .
  • Guidance quality improved: FY26 EPS raised; U.S. Pharma AOI guided to high end; RxTS revenue outlook raised on 3PL; International AOI outlook lifted with Norway HFS accretion .
  • Near-term watch items: Policy/MFN headlines, tariff developments, and payer behavior in GLP‑1 prior auth; management embeds current views in guidance and stresses diversified sourcing and advocacy .
  • Capital deployment balanced: Dividend raised 15% to $0.82; ongoing buybacks (~$2.5B FY26); negative Q1 FCF reflects front‑loaded M&A but FY26 FCF guide intact at $4.4–$4.8B .
  • Stock drivers: Continued GLP‑1/specialty volume momentum, oncology platform scaling, Investor Day updates on MedSurg separation, and closure progress on Norway exit .