McKesson raises its earnings guidance as drug wholesaling outruns its long-term target

McKesson makes its money on volume. It buys medicines from drugmakers and delivers them to pharmacies, hospitals and clinics, and its wholesale arm keeps barely more than a cent of each sales dollar as adjusted operating profit. On 4 November the company raised its guidance for the current fiscal year to adjusted earnings per share of $45.60 to $46.40. It had opened the year in May with a lower range and lifted it once already in August.

The business behind the raise is that wholesaler, which the company reports as North American Pharmaceutical. Its adjusted operating profit, which leaves out items such as restructuring charges, grew 21% in the first half of the year, helped mainly by specialty medicines delivered to health systems and large customers. Management's long-term target for the segment is profit growth of 5% to 8% a year. In May it expected this year to land a little above that band; it now expects 14% to 18%.

Per-share earnings grew faster than the company's earnings, and part of that is arithmetic rather than trade. Adjusted earnings per share rose 18% in the September quarter while adjusted earnings rose 11%, because the company has been buying back its stock and the diluted share count fell from a year earlier.

The new segment range says something less obvious about the months ahead. Combined with the first half already reported and last year's quarterly profits, it implies that the wholesaler's profit grows somewhere between about 8% and 15.5% in the second half, calculated from the reported figures. That is a slowdown from the first half even at the top of the range, and at the bottom it sits just above the long-term band. The company has told investors it plans to step up spending on capabilities and growth in the second half. In August it also warned that some profit from generic drugs had arrived earlier in the year than expected and would come at the expense of later quarters; last quarter did not show that.

Last year's record cuts both ways. The company lifted its earnings range for the previous fiscal year four times against its latest guide in the three calls and one investor day since August 2025 that set it. It finished inside the final range, at $39.11. That fits a habit of guiding with room to spare. But the wholesaler's own profit growth slowed over the same year, from 13% in the second quarter to 6% and 11% in the two quarters after. On that history the slower second half in the new guidance could be caution or a real slowdown, and the figures so far do not settle which.

What is changing more clearly is where the cash goes. McKesson bought back $3.4 billion of its shares in the first half, against a plan of about $5 billion for the year, so less of the plan remains for the second half. Since the quarter ended it has completed the purchase of Precision Medicine Group, a clinical-research and drug-marketing services business, and agreed to invest about $1.4 billion for a minority stake in Option Care Health. The company expects the first deal to add only a small amount to adjusted earnings per share this year, mostly in the final quarter. Of the second, the chief financial officer said: "Our current outlook does not contemplate contributions from Option Care Health."

The raise follows a first half the company called strong, with a second quarter it said beat its own expectations. The same guidance assumes the wholesaler slows toward its long-term pace while spending rises, and that the cash which shrank the share count now goes increasingly into acquisitions this year's figures barely reflect.