McKesson Corp. (MCK) received a major boost recently when the Department of Veterans Affairs (VA) selected the company to continue as its lead pharmaceutical supplier. The Department of VA operates the largest integrated healthcare system in the US.
The agreement between the two parties has been extended for two years. McKesson will supply pharmaceuticals to all of VA's medical centers and outpatient clinics, as well as the VA's Consolidated Mail Outpatient Pharmacies (CMOPs).
McKesson will continue supplying pharmaceuticals to more than 700 locations, including more than 270 medical centers, as well as the VA's seven CMOPs. This two-year contract includes options for up to three, two-year extensions.
We note that McKesson has been working with the VA for the past eight years to serve the healthcare needs of America’s veterans. The renewal of this deal will add to the company’s top line, which climbed 9% in the third quarter of fiscal 2012 to $30.8 billion, ahead of the Zacks Consensus Estimate of $30.2 billion. Strong performance of McKesson’s two segments – Distribution Solutions and Technology Solutions, aided by the acquisition of US Oncology, led to the upside.
The company’s third quarter fiscal 2012 earnings of $1.40 per share (excluding special items) outperformed both the Zacks Consensus Estimate of $1.37 per share and the year-ago earnings of $1.28 per share (Read our full coverage on the earnings at: McKesson Grows Steadily). We believe that the extension of the VA deal will help McKesson continue with its robust performance.
We currently have a Neutral recommendation on McKesson. The stock carries a Zacks #2 Rank (Buy rating) in the short-run.
MCKESSON CORP (MCK): Free Stock Analysis Report
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