Exchange: NYSE | Sector: Healthcare | Industry: Medical Distribution
Q4 2025
Published: May 9, 2025
Earnings Highlights
Revenue of $90.82B up 19% year-over-year
EPS of $10.01 increased by 66.3% from previous year
Gross margin of 4.0%
Net income of 1.26B
"“Community-based care is the most accessible. It is high quality and it is a low cost setting of care. It is absolutely essential that we have a vibrant community-based care setting. Whether that's through drug pricing structures or other service fees that are provided, it's essential that we have fair compensation.â€" - Brian Tyler
McKesson Corporation (MCK) QQ4 2025 Results Analysis: Oncology and Biopharma Services Momentum Drives Record Year and Strong 2026 Outlook
Executive Summary
McKesson delivered a robust fourth quarter of fiscal 2025, underscored by strong revenue growth, disciplined cost management, and meaningful strategic progress across its growth pillars—Oncology and Biopharma Services. Consolidated Q4 revenue rose 19% year over year to $90.8 billion, with adjusted operating profit up 24% to $1.60 billion and diluted earnings per share (EPS) of $10.12 for the quarter. For the full year, McKesson reported revenue of $359.1 billion and adjusted EPS of $33.05, marking a 20% year-over-year increase and a historically strong year that surpassed initial guidance. The company returned $3.5 billion to shareholders and generated free cash flow of $5.2 billion for FY2025, highlighting a durable, cash-generative platform.
Key Performance Indicators
Revenue
90.82B
QoQ: -4.69% | YoY:18.95%
Gross Profit
3.64B
4.01% margin
QoQ: 10.81% | YoY:5.08%
Operating Income
1.59B
QoQ: 29.98% | YoY:15.96%
Net Income
1.26B
QoQ: 43.34% | YoY:59.29%
EPS
10.06
QoQ: 44.13% | YoY:66.28%
Revenue Trend
Margin Analysis
Key Insights
Revenue: $90.823B in Q4, up 18.95% YoY and -4.69% QoQ (trailing four-quarter metrics). Management attributed the quarterly strength to U.S. Pharmaceutical volume, growth in specialty distributions, and higher demand for access and affordability solutions within RxTS.
Gross Profit: $3.639B, up 5.08% YoY and 10.81% QoQ. Gross margin stood at ~4.01% for the quarter (0.0401).
Operating Income: $1.591B, up 15.96% YoY and 29.98% QoQ.
Net Income: $1.26B, up 59.29% YoY and 43.34% QoQ.
Diluted EPS: $10.12 for Q4 (YoY +66%), with annual EPS of $33.05 (+20% YoY).
Financial Highlights
Q4FY2025 highlights and the year-to-date context:
- Revenue: $90.823B in Q4, up 18.95% YoY and -4.69% QoQ (trailing four-quarter metrics). Management attributed the quarterly strength to U.S. Pharmaceutical volume, growth in specialty distributions, and higher demand for access and affordability solutions within RxTS.
- Gross Profit: $3.639B, up 5.08% YoY and 10.81% QoQ. Gross margin stood at ~4.01% for the quarter (0.0401).
- Operating Income: $1.591B, up 15.96% YoY and 29.98% QoQ.
- Net Income: $1.26B, up 59.29% YoY and 43.34% QoQ.
- Diluted EPS: $10.12 for Q4 (YoY +66%), with annual EPS of $33.05 (+20% YoY).
- Free Cash Flow (FY2025): $5.2B; Free cash flow margin and capital deployment remained strong with $3.1B in share repurchases and $345M in dividends for the year.
- Cash position and liquidity: Ended Q4 with cash and cash equivalents of $5.69B and total liquidity around $10.0B.
- Segment highlights: U.S. Pharmaceutical revenues $83.2B (+21% YoY); GLP-1 revenues $10.9B (+46% YoY); RxTS revenues $1.3B (+13% QoQ); Medical-Surgical revenues $2.9B (+1%); International revenues $3.5B (-2% YoY).
- Balance sheet and leverage: Total assets $75.14B; Total liabilities $76.83B; stockholders’ equity reported as negative in the period (–$2.07B), with net debt of approximately –$1.70B (net cash).
- FY2026 outlook: Revenue growth 11–15%; operating profit growth 8–12%; diluted EPS guidance of $36.75–$37.55 (roughly 11–14% YoY growth, excluding net gains in FY2025). Management reaffirmed long-term adjusted EPS growth target of 12–14%.
- Acquisitions and strategic actions: Completed controlling stake acquisitions in PRISM Vision Holdings (accretive to FY2026 by ~$0.20–$0.30 per share) and Core Ventures (expected to close in June 2025, contributing $0.40–$0.60 per share). The company also confirmed a plan to separate the Medical-Surgical segment into an independent company to unlock value and sharpen capital deployment.
- Management tone: Leadership emphasized disciplined portfolio management, cost optimization (roughly $100M in savings in H2 FY2025), and sustained investment in technology, automation, and AI to improve efficiency and patient access. The executive team reiterated confidence in the core platform’s resilience and long-term growth trajectory despite policy and macro uncertainties.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
90.82B
18.95%
-4.69%
Gross Profit
3.64B
5.08%
10.81%
Operating Income
1.59B
15.96%
29.98%
Net Income
1.26B
59.29%
43.34%
EPS
10.06
66.28%
44.13%
Key Financial Ratios
currentRatio
0.9
grossProfitMargin
4.01%
operatingProfitMargin
1.75%
netProfitMargin
1.39%
returnOnAssets
1.68%
returnOnEquity
-60.8%
debtEquityRatio
-3.56
operatingCashFlowPerShare
$61.89
freeCashFlowPerShare
$59.66
dividendPayoutRatio
7.22%
priceToBookRatio
-40.63
priceEarningsRatio
16.72
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Key management themes from the Q4 FY2025 earnings call:
- Strategy and acquisitions: Brian Tyler highlighted ongoing precision in capital allocation toward Oncology and Biopharma Services via strategic acquisitions, including the controlling interests in PRISM Vision (completed by Apr 2025) and Core Ventures (expected June 2025 close). Britt Vitalone noted that these actions are designed to unlock shareholder value and align capital deployment with strategy. The duo stressed that PRISM will contribute approximately $0.20–$0.30 per share in FY2026, while Core Ventures is expected to add $0.40–$0.60 per share, with total expected operating profit uplift in U.S. Pharmaceutical of ~6–7% from these acquisitions.
- Separation of Medical-Surgical: Management reiterated plans to separate the Medical-Surgical segment into an independent company, a move described as unlocking value and enabling two well-capitalized entities to pursue distinct growth priorities. The guidance assumes 100% ownership of the medical segment going forward, with potential timeline and structure information to follow.
- LGDP and PA dynamics in RxTS: The conference call underscored continued demand for access and affordability solutions, with GLP-1 programs driving meaningful contribution to RxTS. Management described a durable need for prior authorization services, while acknowledging payer policy evolution (e.g., PA cadence and potential cash-pay dynamics). They emphasized that GLP-1 demand remains a growth engine with potential volatility but positive long-term trajectory.
- Operational excellence and technology: Brian noted ongoing investments in technology, automation, AI, and data analytics to improve efficiency and service levels. CoverMyMeds’ virtual assistant automated more than 20% of chats during the peak season, maintaining live-agent-like satisfaction, illustrating McKesson’s push to scale high-margin capabilities.
- Tariffs and macro risk management: The executives stressed that tariff changes are monitored and incorporated into the FY2026 guidance. They highlighted diversification of sourcing and pricing flexibility as tools to mitigate potential tariff and policy risk.
- Financial discipline: Britt highlighted cost optimization actions in the medical segment yielding about $100 million in savings in the latter half of FY2025, and reiterated that free cash flow generation remains robust (targeting $4.4–$4.8B in FY2026) alongside targeted share repurchases (~$2.5B).
- Market outlook and confidence: Both leaders emphasized McKesson’s resilient healthcare demand, the strength of the U.S. Oncology Network, and the continued growth of the Biopharma Services platform as catalysts for the FY2026 outlook and long-term growth trajectory.
“Community-based care is the most accessible. It is high quality and it is a low cost setting of care. It is absolutely essential that we have a vibrant community-based care setting. Whether that's through drug pricing structures or other service fees that are provided, it's essential that we have fair compensation.â€
— Brian Tyler
“The creation of two world-class, well-capitalized companies that are well positioned to pursue their respective strategies and growth priorities is a positive development and will unlock significant value for both companies.â€
— Britt Vitalone
Forward Guidance
Near-term outlook (FY2026):
- Revenue growth: 11%–15% year over year, reflecting continued strength in U.S. Pharmaceutical, gains from Prism Vision and Core Ventures, and ongoing RxTS expansion. U.S. Pharmaceutical revenue and operating profit are expected to grow 12%–16% as onboarding of new strategic customers continues and GLP-1 volumes remain a dynamic growth driver with some quarterly variability.
- Operating profit: 8%–12% growth, supported by the contribution from Prism Vision and Core Ventures in FY2026, as well as ongoing cost optimization and scale efficiencies across segments. The long-term adjusted operating profit growth target was raised to 6%–8% for the U.S. Pharmaceutical segment.
- EPS: $36.75–$37.55, representing ~11%–14% growth versus FY2025; excluding the net gains from the 2025 acquisitions, growth is ~13%–16%, in line with the company’s long-range target of 12%–14%. The company reaffirmed a 12%–14% long-term adjusted EPS growth target.
- Segment highlights: U.S. Pharmaceutical revenue to grow ~12%–16%; RxTS to grow with continued demand for access solutions and prior authorizations; GLP-1 tailwinds to sustain growth with continued PA service contributions; Medical-Surgical revenue growth projected at 2%–6% reflecting ongoing optimization and separation plans; International revenue to be flat to down 2% with a path to improvement as Rexall/Well.ca divestitures finalize and Norway/CAN operations stabilize.
- Capital deployment and liquidity: Free cash flow guidance of $4.4–$4.8B; approximately $2.5B in share repurchases; financing for Core Ventures (~$2B) is contemplated with permanent financing; 100% ownership assumption for the medical segment in the planning scenario.
- Key factors investors should monitor: (i) progress and timing of Core Ventures closing (approx. June 2025), (ii) PRISM Vision contributions to FY2026 EPS, (iii) progress of the Medical-Surgical separation and its operational/structural impact, (iv) GLP-1 program dynamics and payer policy shifts, (v) tariff and policy developments affecting pharmaceutical distribution and sourcing, and (vi) cash flow realization versus working capital swings around quarter end.
Overall, management conveyed a constructive outlook underpinned by a diversified asset base, balance-sheet strength, and disciplined capital deployment, albeit with exposure to policy/regulatory shifts and macro volatility. Investors should monitor execution on acquisitions and separation milestones, the sustainability of GLP-1 related demand, and the realization of projected synergies from the Prism Vision and Core Ventures investments.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
MCK Focus
4.01%
1.75%
-60.80%
16.72%
CAH
3.02%
0.89%
-7.35%
25.27%
HSIC
31.10%
4.86%
2.77%
23.68%
PDCO
21.50%
5.10%
6.70%
8.61%
OMI
19.10%
-9.72%
-52.40%
-85.20%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Positive long-term strategic positioning supported by a diversified platform, strong cash flow, and a disciplined capital allocation framework. Near-term upside hinges on successful execution of Prism Vision and Core Ventures acquisitions, the timely separation of Medical-Surgical, and the sustained growth in oncology and biopharma services. The FY2026 EPS guide of $36.75–$37.55 implies mid-to-high single-digit to low double-digit earnings expansion, aided by ~$0.60 of accretion from Core Ventures and ~$0.25–$0.40 from Prism Vision, plus ongoing cost discipline. Risks include regulatory policy shifts (e.g., MFN Part B), tariff dynamics, and integration challenges. Overall, McKesson appears well-positioned to drive shareholder value through a combination of market leadership in distribution, expanding specialty platforms, and value-creating portfolio actions, with the separation of Medical-Surgical potentially unlocking additional strategic flexibility and value.
Key Investment Factors
Growth Potential
Strategic accelerants in Oncology and Biopharma Services (PRISM Vision, Core Ventures) are expected to contribute meaningfully to FY2026 earnings, with total acquisitions contributing up to $0.60 per share (Core Ventures) and $0.20–$0.30 per share (PRISM Vision). Management targets 6–8% long-term adjusted operating profit growth in U.S. Pharmaceuticals, supported by continued RxTS expansion and GLP-1 tailwinds.
Profitability Risk
Regulatory and policy exposure (MFN/Part B implications, tariff dynamics) could impact pricing and reimbursements; GLP-1 program variability and payer policy changes; potential execution risk and integration costs related to Prism Vision and Core Ventures; the Medical-Surgical separation adds execution risk and capital-deployment considerations.
Financial Position
Strong liquidity with ~$5.7B cash and ~$10B total liquidity; free cash flow of $5.2B in FY2025 and guidance of $4.4–$4.8B for FY2026; net cash position (net debt approx. -$1.7B) despite sizable acquisitions; balance sheet features negative stockholders’ equity in the reported period, underscoring the importance of capital structure and consolidation effects in the reported figures.
SWOT Analysis
Strengths
Large, diversified portfolio across distribution, Oncology, Biopharma Services, and RxTS.
Leading U.S. pharmaceutical distribution platform with scale and deep customer relationships (U.S. Pharmacy, Health Mart, and Oncology Network).
Cost optimization actions delivering ~$100M in savings in 2H FY2025 and ongoing productivity benefits.
Weaknesses
Reported negative stockholders’ equity in the balance sheet for the period analyzed, suggesting balance sheet peculiarities or consolidation effects.
Consolidation-focused business model with exposure to regulatory changes affecting reimbursements and drug pricing.
Reliance on large-scale supplier and customer networks, which may be sensitive to macro conditions.
Opportunities
Completion of Core Ventures closing (adds ~530 providers to U.S. Oncology Network, ~3,300 total) and Prism Vision contributions to FY2026 earnings.
Separation of Medical-Surgical into a standalone company to unlock value and sharpen strategic focus.
Expansion of GLP-1 access and prior authorization services through CoverMyMeds and RxTS; potential to capture incremental rebates and payer efficiencies.
Digital and AI-enabled operating efficiencies to further improve margin and service quality.
Threats
Policy changes (MFN Part B, tariff regulation) and regulatory scrutiny affecting drug pricing and payer dynamics.
Macro energy/policy cycles and healthcare spending fluctuations; potential reimbursement pressures on community-based care models.
Integration risk and execution delays associated with large acquisitions and the separation of segments.
Market competition in distribution and biopharma services and dependence on patient access programs.
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