Is McKesson Stock Underperforming the Dow?

Irving, Texas-based McKesson Corporation (MCK) distributes pharmaceuticals, medical-surgical supplies, and health and beauty care products. With a market cap of $88.3 billion, the company also develops, implements, and supports software that facilitates the integration of data throughout the health enterprise. In addition, McKesson offers analytic, care management, and patient solutions for payers.

Companies worth $10 billion or more are generally described as “large-cap stocks.” MCK effortlessly fits that bill, with its market cap exceeding this mark, underscoring its size, influence, and dominance within the medical distribution industry. MCK stands as one of the titans in the U.S. pharmaceutical distribution landscape with an expansive distribution network and comprehensive product offerings enabling it to meet diverse customer needs effectively. MCK's ability to offer a wide range of services, from drug distribution to medical-surgical supply and technology solutions, allows it to tap into various revenue streams and mitigate risks associated with any single line of business.

Despite its notable strength, MCK slipped 26.2% from its 52-week high of $999, achieved on Mar. 3. Over the past three months, MCK stock has declined 25.7%, underperforming the Dow Jones Industrials Average’s ($DOWI) 4.9% gains during the same time frame.

Shares of MCK fell 10.2% on a YTD basis but climbed 2.1% over the past 52 weeks, underperforming DOWI’s YTD gains of 6.8% and 21.3% returns over the last year.

To confirm the bearish trend, MCK has been trading below its 200-day moving average since early May. The stock has been trading below its 50-day moving average since late March. 

On May 7, MCK shares closed up by 1.5% after reporting its Q4 results. Its adjusted EPS of $11.69 topped Wall Street expectations of $11.56. The company’s revenue was $96.3 billion, falling short of Wall Street forecasts of $101.9 billion. MCK expects full-year adjusted EPS in the range of $43.80 to $44.60.

In the competitive arena of medical distribution, Cencora, Inc. (COR) has lagged behind MCK, with a 21.6% downtick on a YTD basis and 9.3% decline over the past 52 weeks.

Wall Street analysts are bullish on MCK’s prospects. The stock has a consensus “Strong Buy” rating from the 17 analysts covering it, and the mean price target of $966.73 suggests a potential upside of 31.2% from current price levels.