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McKesson Inc. Stock Buy Recommendation Reiterated (MCK)

NEW YORK (TheStreet) -- McKesson (NYSE:MCK) has been reiterated by TheStreet Ratings as a buy with a ratings score of A. The company's strengths can be seen in multiple areas, such as its good cash flow from operations, solid stock price performance, largely solid financial position with reasonable debt levels by most measures and notable return on equity. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:

  • Net operating cash flow has significantly increased by 78.84% to $2,207.00 million when compared to the same quarter last year. In addition, MCKESSON CORP has also vastly surpassed the industry average cash flow growth rate of -42.10%.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • The debt-to-equity ratio is somewhat low, currently at 0.69, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Despite the fact that MCK's debt-to-equity ratio is low, the quick ratio, which is currently 0.58, displays a potential problem in covering short-term cash needs.
  • MCKESSON CORP's earnings per share declined by 47.4% in the most recent quarter compared to the same quarter a year ago. Stable earnings per share over the past year indicate the company has sound management over its earnings and share float. We anticipate these figures will begin to experience more growth in the coming year. During the past fiscal year, MCKESSON CORP reported lower earnings of $5.59 versus $5.60 in the prior year. This year, the market expects an improvement in earnings ($8.09 versus $5.59).
  • MCK, with its decline in revenue, underperformed when compared the industry average of 13.7%. Since the same quarter one year prior, revenues slightly dropped by 3.4%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.

McKesson Corporation, together with its subsidiaries, delivers pharmaceuticals, medical supplies, and health care information technologies to the healthcare industry primarily in the United States. It operates in two segments, McKesson Distribution Solutions and McKesson Technology Solutions. McKesson has a market cap of $26.5 billion and is part of the services sector and wholesale industry. Shares are up 19.6% year to date as of the close of trading on Tuesday.

You can view the full McKesson Ratings Report or get investment ideas from our investment research center.

--Written by a member of TheStreet Ratings Staff.

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