Mckesson Reports 21% Revenue Growth, Decline in Profitability Amid Increased Expenses and Restructuring Efforts

McKesson Corporation reported significant financial results for the three and six months ended September 30, 2024, reflecting both revenue growth and challenges in profitability. Total revenues for the quarter reached $93.651 billion, a 21% increase from $77.215 billion in the same period of 2023. For the six months, revenues rose 14% to $172.934 billion, compared to $151.698 billion in the prior year. The U.S. Pharmaceutical segment was a key driver, with revenues increasing by 23% to $85.726 billion for the quarter and 15% to $157.441 billion for the six months.

Despite the revenue growth, net income for the three months ended September 30, 2024, fell to $287 million from $703 million in the same period last year. For the six months, net income decreased to $1.247 billion from $1.7 billion. Net income attributable to McKesson Corporation also declined, with figures of $241 million for the quarter and $1.156 billion for the six months, down from $664 million and $1.622 billion, respectively. Diluted earnings per share dropped to $1.87 for the quarter, down from $4.92, and to $8.89 for the six months, down from $11.95.

The decline in profitability was attributed to increased operating expenses, which rose by 26% for the quarter and 19% for the six months, driven by restructuring charges and costs associated with the remeasurement of the Canadian retail disposal group. McKesson recorded a significant charge of $643 million related to this disposal group, impacting both gross profit and operating income.

Strategically, McKesson announced the sale of its Rexall and Well.ca businesses in Canada for approximately $148 million, with the transaction expected to close in the second half of fiscal 2025. The company also initiated a restructuring program aimed at operational efficiencies, incurring $234 million in related charges during the quarter.

In terms of cash flow, McKesson generated $720 million from operating activities for the six months, a substantial improvement from cash used in the same period last year. The company returned $2.2 billion to shareholders through stock repurchases and dividends, with a remaining repurchase authorization of $8.6 billion as of September 30, 2024.

Overall, while McKesson experienced robust revenue growth, its profitability was significantly impacted by increased operating expenses and restructuring efforts, alongside strategic divestitures aimed at streamlining operations.