Healthcare distributor and services company McKesson (NYSE: MCK) fell short of the market’s revenue expectations in Q1 CY2025, but sales rose 18.9% year on year to $90.82 billion. Its non-GAAP profit of $10.12 per share was 3% above analysts’ consensus estimates.
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McKesson (MCK) Q1 CY2025 Highlights:
- Revenue: $90.82 billion vs analyst estimates of $94.74 billion (18.9% year-on-year growth, 4.1% miss)
- Adjusted EPS: $10.12 vs analyst estimates of $9.83 (3% beat)
- Adjusted EPS guidance for the upcoming financial year 2026 is $37.15 at the midpoint, beating analyst estimates by 0.9%
- Operating Margin: 1.8%, in line with the same quarter last year
- Free Cash Flow Margin: 8.2%, up from 5.1% in the same quarter last year
- Market Capitalization: $90.53 billion
Company Overview
With roots dating back to 1833, making it one of America's oldest continuously operating businesses, McKesson (NYSE: MCK) is a healthcare services company that distributes pharmaceuticals, medical supplies, and provides technology solutions to pharmacies, hospitals, and healthcare providers.
Sales Growth
A company’s long-term sales performance is one signal of its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Over the last five years, McKesson grew its sales at a decent 9.2% compounded annual growth rate. Its growth was slightly above the average healthcare company and shows its offerings resonate with customers.
Long-term growth is the most important, but within healthcare, a half-decade historical view may miss new innovations or demand cycles. McKesson’s annualized revenue growth of 13.9% over the last two years is above its five-year trend, suggesting its demand recently accelerated. 
We can dig further into the company’s revenue dynamics by analyzing its most important segment, U.S. Pharmaceutical . Over the last two years, McKesson’s U.S. Pharmaceutical revenue averaged 16.7% year-on-year growth.
This quarter, McKesson’s revenue grew by 18.9% year on year to $90.82 billion but fell short of Wall Street’s estimates.
Looking ahead, sell-side analysts expect revenue to grow 12.2% over the next 12 months, a slight deceleration versus the last two years. We still think its growth trajectory is attractive given its scale and indicates the market is baking in success for its products and services.
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Operating Margin
Operating margin is one of the best measures of profitability because it tells us how much money a company takes home after subtracting all core expenses, like marketing and R&D.
McKesson was roughly breakeven when averaging the last five years of quarterly operating profits, lousy for a healthcare business.
On the plus side, McKesson’s operating margin rose by 3.3 percentage points over the last five years, as its sales growth gave it operating leverage. This performance was mostly driven by its past improvements as the company’s margin was relatively unchanged on two-year basis.
This quarter, McKesson generated an operating profit margin of 1.8%, in line with the same quarter last year. This indicates the company’s overall cost structure has been relatively stable.
Earnings Per Share
Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.
McKesson’s EPS grew at an astounding 17.2% compounded annual growth rate over the last five years, higher than its 9.2% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.
We can take a deeper look into McKesson’s earnings to better understand the drivers of its performance. As we mentioned earlier, McKesson’s operating margin was flat this quarter but expanded by 3.3 percentage points over the last five years. On top of that, its share count shrank by 27.6%. These are positive signs for shareholders because improving profitability and share buybacks turbocharge EPS growth relative to revenue growth. 
In Q1, McKesson reported EPS at $10.12, up from $6.18 in the same quarter last year. This print beat analysts’ estimates by 3%. Over the next 12 months, Wall Street expects McKesson’s full-year EPS of $33.10 to grow 11.2%.
Key Takeaways from McKesson’s Q1 Results
It was good to see McKesson narrowly top analysts’ full-year EPS guidance expectations this quarter. We were also happy its EPS outperformed Wall Street’s estimates. On the other hand, its revenue missed significantly. Overall, this was a weaker quarter. The stock remained flat at $690.25 immediately following the results.
So do we think McKesson is an attractive buy at the current price? We think that the latest quarter is only one piece of the longer-term business quality puzzle. Quality, when combined with valuation, can help determine if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.
