Auriga Reiterates a 'Buy' Rating on McKesson Corp (MCK); Raises Estimates & PT

October 28, 2009 8:08 AM EDT

Auriga reiterates a 'Buy' rating on McKesson Corp (NYSE: MCK) raises price target to $71.

Auriga analyst says, "Increasing Q3 EPS estimate by $0.16 to $1.19: The breakout of the estimate raise is as follows: US$0.05 from the sale of the joint venture interest; US$0.07 flu benefit from the CDC contract; and US$0.04 fundamental business improvement. We note the flu benefit is incremental to the $0.03 we previously attributed to the impact of the CDC contract...Raising Q4 EPS estimate by $0.05 to $1.23: This increase reflects some flu benefit but mostly organic improvements. We attribute $0.02 of our increase to the flu impact on the MCK’s core businesses (sales of Tamiflu, kits and related supplies) and $0.03 to operations...We use a sum-of-the-parts approach applied to MCK’s distribution and technology solution segments to arrive at our target. These multiples are applied to our earnings forecast for each business segment, based on our upwardly revised calendar 2010 EPS estimate of $4.63 (from $4.55). While healthcare IT comps average 27x FY10 consensus estimates, we use a 23x multiple given MCK’s lower growth rate, owing to its vast footprint, relative to healthcare IT pure-plays."

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McKesson Corporation, together with its subsidiaries, provides supply, information, and care management products and services for the healthcare industry.

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