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Revenue: $105.4 billion, an increase of 8% year over year.
Adjusted Earnings Per Share: $9.93, an increase of 20% year over year.
Gross Profit: $3.7 billion, an increase of 13%.
Operating Expenses: $2.1 billion, an increase of 10%.
Operating Profit: $1.7 billion, an increase of 16%.
Interest Expense: $75 million.
Diluted Weighted Average Shares: $119.2 million, a decrease of 5%.
North American Pharmaceuticals Revenue: $86.8 billion, an increase of 5%.
North American Pharmaceuticals Operating Profit: $894 million, an increase of 19%.
Oncology and Multispecialty Revenue: $14.2 billion, an increase of 33%.
Oncology and Multispecialty Operating Profit: $405 million, an increase of 41%.
Prescription Technology Solutions Revenue: $1.6 billion, an increase of 9%.
Prescription Technology Solutions Operating Profit: $303 million, an increase of 13%.
Medical-Surgical Solutions Revenue: $2.8 billion, an increase of 4%.
Medical-Surgical Solutions Operating Profit: $195 million, a decrease of 20%.
Corporate Expenses: $144 million, an increase of 4%.
Free Cash Flow: Negative $372 million, including $152 million in capital expenditures.
Share Repurchases: $2.5 billion of shares repurchased during the quarter.
Dividend: Board approved a 15% increase to the quarterly dividend.
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For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Strong fiscal Q1 2026 results with revenues up 8% to $105 billion and adjusted EPS up 20% to $9.93, exceeding expectations.
Raised full-year adjusted EPS guidance to $44.20-$45.00, reflecting confidence in continued momentum.
Three segments (North American Pharmaceutical, Oncology and Multispecialty, Prescription Technology Solutions) delivered double-digit operating profit growth.
Oncology and Multispecialty segment saw 33% revenue growth, with organic growth of 24% excluding Core Ventures acquisition.
Completed strategic separation actions for Medical-Surgical Solutions, including Apollo minority investment and $2.25 billion Term Loan B, positioning for standalone growth.
Returned $2.6 billion to shareholders in Q1, including $2.5 billion in share repurchases, and increased dividend by 15%.
Strong GLP-1 revenue growth of 24% year-over-year, driven by both cash and coverage markets.
Continued investment in AI and technology, with examples of rapid deployment and operational efficiencies.
Solid free cash flow on a trailing twelve-month basis of approximately $6.1 billion, providing financial flexibility.
New CFO Kenny Cheung brings extensive experience and a focus on disciplined execution and capital allocation.
Medical-Surgical Solutions segment operating profit decreased 20% due to product mix and one-time administrative expenses.
Free cash flow was negative $372 million in Q1, though improved year-over-year, with full-year guidance of $4.5-$4.9 billion.
Revenue growth in North American Pharmaceutical was partially offset by lower branded pharmaceutical pricing and branded-to-generic conversions.
Interest expense increased to $75 million due to financing activities supporting the MedSurg separation.
Effective tax rate guidance increased slightly to 18%-19% due to higher operating profit growth.
Potential policy risks include 340B reform and IRA Part D implementation, which could impact the business.
Q2 fiscal 2027 will face a tough comparison with a $51 million gain from the sale of an equity investment in the US oncology network in the prior year.
Operating expenses increased 10% due to investments, though partially offset by operating leverage.
The company anticipates accelerated investments in the second half of fiscal 2027, which may pressure near-term margins.
The MedSurg separation involves ongoing costs and complexity, including noncash accounting adjustments.
Q: George Hill (Deutsche Bank) asked about the drivers of the outperformance in the North American Pharma segment, specifically what is driving the organic growth and margin expansion, and if there are any one-time risks in the quarter. A: Kenny Cheung (CFO) explained that the 5% revenue growth was driven by increased prescription transaction volume, including higher specialty product volumes, partially offset by lower branded pharmaceutical pricing and branded-to-generic conversions. Operating profit grew 19%, driven by specialty distribution to health systems and the timing of new product launches. He noted that margin expansion is influenced by customer mix, product mix, and channel mix, and that the business remains robust with momentum expected to carry into future quarters.
Q: Stephen Baxter (Wells Fargo) asked if the guidance improvement was primarily driven by the first-quarter outperformance and whether there are any timing-related drivers or if the company is taking a conservative approach to the rest of the year. A: Brian Tyler (CEO) confirmed that the guidance raise is largely driven by North American Pharmaceutical performing at the high end of its operating profit range. He emphasized that the guidance is a balanced view of the year, not a best-case scenario, and highlighted broad-based growth across NAP, Oncology & Multispecialty, and Prescription Technology Solutions, all of which grew double digits. He noted that June was the strongest month of the quarter and that the team is focused on disciplined execution, mitigating risks, and capitalizing on opportunities.
Q: Elizabeth Anderson (Evercore ISI) asked about the drivers of the strong growth in Oncology and Multispecialty, specifically whether Florida Cancer Specialists is performing in line with expectations and to parse apart the accelerated growth in the segment. A: Kenny Cheung (CFO) broke down the 33% revenue growth into three key drivers: growth in existing provider solutions and specialty distribution (penetration), new business wins, and contributions from the Core Ventures acquisition. Excluding Core Ventures, revenue grew approximately 24%. Operating profit grew 41% year-over-year, or roughly 15% excluding Core Ventures. Brian Tyler (CEO) added that Florida Cancer Specialists has been integrated successfully, performing at the high end of the guidance range provided at the time of acquisition, and noted the company began lapping that transaction in the current quarter.
Q: Brian Tanquilut (Jefferies) asked about the market dynamics for GLP-1 medications, particularly regarding employer coverage and the direct-to-consumer aspect. A: Brian Tyler (CEO) stated that the company continues to see strong growth in GLP-1s, with a vibrant cash market and strong growth in the coverage segment, as evidenced by the performance of CoverMyMeds. He noted that while there has been debate about coverage, it hasn't moved significantly, and the overall growth and performance of the category remains healthy and robust.
Q: Lisa Gill (JPMorgan) asked about the impact of incremental changes around 340B on the North American business and other policy issues the company is watching, such as the IRA Part D and the GLOBE demonstration project. A: Brian Tyler (CEO) said it's premature to speculate on the financial impact of 340B reform, as the proposal is still under comment and review. He noted that 340B is a complicated ecosystem and any reform will create both opportunities and challenges for various stakeholders. He emphasized McKesson's scale, technology, and compliance expertise will allow it to navigate changes. Regarding IRA Part D, he noted it doesn't go into effect until January 2028 and there are many unknowns, but the community provider setting is the low-cost setting with high access to care. He highlighted the GLOBE program as a good solution that lowers drug prices while protecting community-based providers. Kenny Cheung (CFO) added that more than 95% of branded drugs are fee-for-service, making operating profit far less sensitive to WAC price changes.
Q: Erin Wright (Morgan Stanley) asked about the quarterly cadence for the North America distribution business and any factors to be aware of for the balance of the year. A: Kenny Cheung (CFO) provided details on quarterly cadence, noting that Q4 is typically the biggest quarter for North America from a dollar standpoint. He reminded that Q4 is the annual verification season for Prescription Technology Solutions. He also noted the quarterly cadence can vary due to internal investment patterns, product launch timing, and product lifecycles. He reminded analysts to model the quarterly NCI correctly following the Apollo minority interest in MedSurg, and noted the Norway divestiture was completed in January 2026, with a $25 million year-over-year impact in Q2. He also flagged a $51 million gain being lapped in Q2 from the sale of an equity investment in the US Oncology Network.
Q: Eric Percher (Nephron Research) asked about the long-term growth rate for Oncology and Multispecialty versus market growth, and how the company can extend growth through additional providers or services. A: Brian Tyler (CEO) expressed pleasure with the growth, noting even adjusting for the last quarter of FCS impact, the segment grew 24%. He attributed growth to organic market growth, same-store visit growth, physician recruitment, and geographic expansion. He noted that introducing technologies like AI should expand capacity to see patients, which is a growth driver not previously discussed. Kenny Cheung (CFO) added that the 15% growth mentioned is all organic, with no M&A, and growth will come from driving more throughput through the existing provider network and winning new business. He noted the company has 3,400 providers in the US Oncology Network but supports a larger basket of 14,000 providers through GPO and distribution services.
Q: Kevin Caliendo (UBS) asked about the free cash flow trend, noting it's declining year-over-year and over the last couple of years, and when it might start accelerating along with income growth. A: Kenny Cheung (CFO) acknowledged the question, noting that first-quarter free cash flow is typically negative due to working capital and inventory timing. However, this year was much improved, with free cash flow of roughly negative $370 million versus roughly negative $1 billion last year. He stated the company is sticking with its current guidance but is seeing structural improvements in working capital management through technology and AI. He expressed confidence in the forecast and noted there are opportunities to improve free cash flow throughout the year.
Q: Michael Cherny (Leerink Partners) asked about the moving pieces for North American Pharma in the back half of the year, including comp dynamics, utilization, and potential new
For the complete transcript of the earnings call, please refer to the full earnings call transcript.