Credit Suisse Downgrades McKesson (MCK) to Underperform
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Credit Suisse downgraded McKesson (NYSE: MCK) from Neutral to Underperform with a price target of $131.00 (from $150.00) on capital efficiency discrepancy.
Analyst Robert Willoughby commented, "MCK pointed to irrational industry pricing for a second negative EPS revision this year. AmerisourceBergen and Cardinal Health also noted weaker pricing, but with competitive advantages in generic sourcing capabilities from an invested capital standpoint, their practices seem more consistent with maintaining high ROICs. MCK's average invested capital base equals the sum for its two competitors, yet its NOPAT grew at about half the CAGR over FY12-FY16, with higher capital requirements and lower earnings ahead, in our view. Longer term, it may benefit more from owning sourcing capabilities outright, but Celesio contributions, higher deal spend/capital needs, and distortions from the pending Technology Solutions exit limit our near term enthusiasm."
Shares of McKesson closed at $141.33 yesterday.
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Create E-mail Alert Related CategoriesAnalyst Comments, Analyst PT Change, Downgrades, Hot Downgrades
Related EntitiesCredit Suisse, Earnings, Robert Willoughby
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