MCK: North American Pharma Momentum Will Drive Future Outlook Amid Policy Uncertainty

We modestly raise our McKesson fair value estimate to about $934.79 per share from roughly $934.71, reflecting analysts' higher price targets, stronger confidence in long term EPS growth, and sustained North American Pharma momentum.

Analyst Commentary

Street research on McKesson has turned increasingly constructive, with multiple firms lifting price targets in response to upgraded long term guidance, stronger segment momentum, and enhanced disclosure following the recent investor day.

Bullish Takeaways

• Bullish analysts see McKesson's raised long term EPS growth outlook of 13 to 16 percent as a key driver of further multiple expansion and support for price targets approaching or exceeding 900 dollars per share.
• North American Pharma and oncology or multispecialty businesses are viewed as the central growth engines, with updated AOI targets above prior US Pharma guidance reinforcing confidence in durable mid single digit to high single digit core AOI growth into fiscal 2026.
• Several reports highlight simplified segment reporting and improved transparency as catalysts for higher conviction in the durability and quality of earnings, which helps justify higher valuation multiples.
• Analysts point to McKesson's relatively unlevered balance sheet and focused investments in higher margin oncology and biopharma services as adding optionality for capital deployment and supporting the premium to peers.

Bearish Takeaways

• Bearish analysts, while generally constructive, maintain more tempered targets near the mid 700 to mid 800 dollar range, reflecting caution around how much of the long term guidance improvement is already embedded in the stock's current forward earnings multiple.
• Some research notes flag planned second half investment spending and the step up in growth expectations as potential execution risks, particularly if industry utilization or drug pricing trends soften from current robust levels.
• A neutral stance from select coverage emphasizes that the upgraded growth algorithm, though encouraging, may face near term industry headwinds, leading to a more balanced risk or reward profile compared with the most bullish scenarios.
• There is also an undercurrent of concern that peer performance and sector wide rerating, rather than McKesson specific catalysts alone, may be contributing to recent target increases, which could limit incremental upside if industry conditions normalize.

What's in the News

• Trump administration prepares a new probe into whether U.S. trading partners are underpaying for pharmaceuticals, potentially affecting pricing dynamics for major drug distributors including McKesson (Financial Times)
• McKesson completes a major share repurchase tranche, buying back 1,200,000 shares in Q3 2025 and bringing total repurchases under its May 2018 authorization to 63.2 million shares, or about 41.11 percent of shares outstanding
• Citius Oncology selects McKesson as an authorized distributor of record for LYMPHIR, an FDA approved immunotherapy for relapsed or refractory Stage I to III cutaneous T cell lymphoma. This reinforces McKesson's role in specialty oncology distribution ahead of the drug's planned late 2025 commercial launch
• Iterum Therapeutics announces that ORLYNVAH is now stocked at McKesson through a specialty distribution channel, enabling select physicians to procure the therapy directly in line with their practice preferences
• Playhouse MD forms a strategic distribution alliance with McKesson Medical Surgical, making its play based pediatric at home medical devices available nationwide via Amazon and positioning McKesson as a key partner in pediatric consumer healthcare

Valuation Changes

• Fair Value Estimate has risen slightly to about $934.79 per share from roughly $934.71, reflecting a marginal upward adjustment in the long term outlook.
• Discount Rate has edged down fractionally to approximately 6.96 percent from 6.96 percent, implying virtually no change in the risk profile applied to future cash flows.
• Revenue Growth assumption has increased modestly to about 8.48 percent from roughly 8.41 percent, indicating a slightly stronger top line trajectory.
• Net Profit Margin expectation has dipped marginally to approximately 1.26 percent from about 1.27 percent, suggesting a very small compression in anticipated profitability.
• Future P/E multiple has risen insignificantly to around 21.41 times from about 21.41 times, signaling a steady valuation framework with only a minimal upward tweak.