McKesson Third Quarter Earnings Sneak Peek

S&P 500 (NYSE:SPY) component McKesson (NYSE:MCK) will unveil its latest earnings tomorrow, Thursday, January 31, 2013. McKesson delivers cost-reducing medicines, pharmaceutical supplies, information, and care management products and services.

McKesson Earnings Preview Cheat Sheet

Wall St. Earnings Expectations: The average analyst estimate is for net income of $1.63 per share, a rise of 16.4% from the company’s actual earnings for the year-ago quarter. During the past three months, the average estimate has moved down from $1.64. Between one and three months ago, the average estimate was unchanged. It has since dropped over the last month. For the year, analysts are projecting profit of $7.29 per share, a rise of 14.3% from last year.

Past Earnings Performance: The company has beaten estimates the last four quarters and is coming off a quarter where it topped forecasts by 16 cents, reporting net income of $1.92 per share against a mean estimate of profit of $1.76 per share.

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A Look Back: In the second quarter, profit rose 35.5% to $401 million ($1.67 a share) from $296 million ($1.18 a share) the year earlier, exceeding analyst expectations. Revenue fell 1.2% to $29.85 billion from $30.22 billion.

Here’s how McKesson traded following its last earnings report 3 months ago and leading up to its upcoming earnings report this week:

mck

Stock Price Performance: Between October 29, 2012 and January 25, 2013, the stock price rose $14.03 (15.2%), from $92.58 to $106.61. The stock price saw one of its best stretches over the last year between March 2, 2012 and March 16, 2012, when shares rose for 11 straight days, increasing 6.6% (+$5.39) over that span. It saw one of its worst periods between July 18, 2012 and July 30, 2012 when shares fell for nine straight days, dropping 6.2% (-$6.02) over that span.

Analyst Ratings: With seven analysts rating the stock a buy, none rating it a sell and five rating the stock a hold, there are indications of a bullish stance by analysts.

Key Stats:

After experiencing income increases the last three quarters, the company is hoping to keep the good news coming with this earnings announcement. Net income rose 23.5% in the fourth quarter of the last fiscal year and 32.9% in the first quarter before increasing again in the second quarter.

On the top line, the company is looking to get back on the right track after last quarter’s drop snapped a string of revenue increases. Revenue rose 9.2% in the third quarter of the last fiscal year, 9.9% in the fourth quarter of the last fiscal year and 2.7%in the first quarter before dropping in the second quarter.

Balance Sheet Analysis: The company’s current ratio of assets to liabilities came in at 1.11 last quarter. The current ratio is an indication of a firm’s liquidity and ability to meet creditor demands and generally, for every dollar the company owes in the short term, it has that figure available in assets that can be converted to cash in the short term. The company improved this liquidity measure from 1.1 in the first quarter to the last quarter driven in part by an increase in current assets. Current assets increased 4.7% to $23.09 billion while liabilities rose by 3.2% to $20.75 billion.

Wall St. Revenue Expectations: On average, analysts predict $30.81 billion in revenue this quarter, a decline of 0.1% from the year-ago quarter. Analysts are forecasting total revenue of $122.94 billion for the year, a rise of 0.2% from last year’s revenue of $122.73 billion.

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(Company fundamentals by Xignite Financials. Earnings estimates provided by Zacks)