McKesson: GLP-1 Contributed More Than 1/3 Of Growth

Core Insights - McKesson reported a 15% revenue growth and 12.2% adjusted EPS growth in Q3 FY24, driven by strong performance in GLP-1 medications [2][3][4] - The company has a robust share buyback program, returning $2.6 billion to shareholders year-to-date, with $7.3 billion remaining in stock repurchase authorization [2][4] - McKesson's GLP-1 revenues reached $7.5 billion, contributing 60% to year-over-year growth, and represent approximately 9.3% of total group revenue [3][4][9] Financial Performance - In Q3 FY24, McKesson generated $100 million in free cash flow, totaling $2.9 billion over the trailing twelve months [2] - The company has raised its full-year outlook, projecting 11%-14% revenue growth and 8%-11% adjusted operating profit growth [6][7] - For FY25, McKesson anticipates a 9% revenue growth, with GLP-1 volumes expected to contribute an additional 3% to topline growth [9][10] Growth Drivers - The growth in GLP-1 medications is supported by a strong prior-authorization network, simplifying the reimbursement process for patients and pharmaceutical companies [4][5] - Market leaders like Novo Nordisk are expanding production, indicating a commitment to scaling up GLP-1 manufacturing, which benefits McKesson's distribution capabilities [4][5] - The opening of two new distribution centers in the U.S. is expected to further contribute to McKesson's growth [7] Valuation and Outlook - The fair value of McKesson's stock is maintained at $660 per share, with the stock trading at an attractive valuation of 14x free cash flow [11][14] - Projected operating profits and net profits are expected to grow modestly, with a focus on margin expansion despite lower margins from GLP-1 medications [11][12] - The company is expected to continue delivering strong growth momentum, with no significant surprises anticipated in Q4 FY24 results [7][8]