QS Research · Michael Burry's Scion Capital analyst template · 2006
MCKESSON CORP (MCK)
As of 2026-11-06 · 12/15 boxes filled from SEC filings and market data
Conclusion: PASS
Conviction low · base case +8% · downside -17% · upside +20%
McKesson is a 3.7%-gross-margin distribution toll road, not a franchise: gross profit grew 20% over six years while revenue grew 69% (roughly 5.1% gross margin in FY2021 to about 3.6% in FY2026), so the market is paying 26.1x TTM P/E and 16.8x EV/EBITDA for volume growth with no pricing power. The earnings themselves are clean and unlevered-looking - FY2026 pre-tax income $6.20B against operating income $6.21B, TTM net income $4.70B, TTM FCF $7.11B (5.8% yield), and cash of $6.53B against $9.20B of debt, with the -$3.95B equity a buyback artefact rather than distress. But essentially all of that FCF is already handed back ($6.78B buybacks + $0.40B dividends = $7.18B TTM), and the stock sits 5.4% below its 52-week high after +23.6% in a year, so nothing here is being given away. Marking the same TTM EBITDA of $7.47B (no cycle-averaging used: TTM to 2026-09-30 is the base throughout, and it is within a whisker of the FY2026 $4.76B net-income run-rate) at 14x gives $883/share (-17%), at 18x - the CAH/COR level - $1,141/share (+8%), and at 20x $1,271/share (+20%): roughly 1:1. Pass: the +30% base case with a -25% floor is not remotely met, and the genuinely interesting parts (estimate catch-up to a twice-raised guide, the Wellverse separation) are option value, not margin of safety.
Key numbers
- Share price: $1,060.84
- Market cap: $122.48B
- Latest financial period: TTM to Sep 30, 2026
- Revenue (TTM): $418.79B
- EV / EBITDA (TTM): 16.8x
- P/E (TTM): 26.1x
The 15 boxes
- ✓ 1. Long-form business notes
FY2026 revenue was $403.43B with gross profit of $14.55B, operating income of $6.21B, and operating cash flow of $6.16B. McKesson reports four segments after a Q2 FY2026 resegmentation: North American Pharmaceutical, Oncology & Multispecialty, Prescription Technology Solutions, and Medical-Surgical. Since FY2021, revenue rose from $238.23B, the Norway businesses were sold and Canada moved into North American Pharmaceutical, and McKesson plans to separate Medical-Surgical.
- ✓ 2. Competitive advantage
McKesson's competitive position rests on scale and cash generation, not on price or intellectual property: FY2026 revenue of $403.43B produced only $14.55B of gross profit (about 3.6%, computed from S27), down from about 5.1% in FY2021, so gross profit grew 20% over six years while revenue grew 69%. It is one of three large U.S. drug distributors — the 10-K names Cencora and Cardinal Health as primary competitors across distribution, specialty and GPO lines — and competes in every segment against national, regional and specialty rivals as well as customers who may insource. The advantage it does show is cash-based and asset-light: FY2026 operating cash flow $6.16B on capex of just $436M, with operating cash flow at or above net income in all six years shown. Equity has been negative in every year FY2021-FY2026 (-$2.17B FY2026) after $4.75B of FY2026 buybacks, so return on equity cannot be measured from these sources.
- ✓ 3. 10-Q takeaways
Q2 FY2027 (quarter ended 2026-09-30) was an operating beat: revenues $110,957M, +8% vs $103,150M, gross profit +12% to $3,956M and gross margin 3.57% vs 3.43% (+14 bp), with diluted EPS $10.44 vs $8.92 helped by a 6% lower diluted share count (116.7M vs 124.4M). Growth was concentrated in Oncology & Multispecialty (+24% to $14,980M) and North American Pharmaceutical (+6% to $91,360M, operating margin 1.19% vs 0.99%), while Medical-Surgical Solutions operating profit fell 25% to $164M on separation charges and ambulatory weakness. Reported profit is polluted by one-offs: $50M Q2 / $56M six-month antitrust settlement gains booked in cost of sales, a $36M opioid liability credit and $282M + $109M remeasurement charges sitting in noncontrolling interests; six-month net income attributable to McKesson fell 3% to $1,832M despite +8% revenue. Cash return stays aggressive ($3.6B in six months, $4.3B authorization left) while post-quarter M&A (Precision Medicine ~$2.25B, Spectrum Vision ~$525M, 49% of Option Care Health ~$1.4B) shifts capital toward Oncology & Multispecialty.
- ✓ 4. Corporate governance
Filled; members read this box.
- ✓ 5. Overview of the prior 3 years of 8-K filings
Filled; members read this box.
- ✓ 6. Other significant filings
Filled; members read this box.
- ✓ 7. Chronology of significant news and events
Filled; members read this box.
- ✓ 8. Comparables valuation interpretation
Filled; members read this box.
- ✓ 9. Insider trading interpretation
Filled; members read this box.
- ○ 10. Earnings-call notes
- ○ 11. Impression of the shareholder letter
- ○ 12. Scuttlebutt overview
- ✓ 13. Valuation and risk/reward summary
Filled; members read this box.
- ✓ 14. Current price suppression and potential catalysts
Filled; members read this box.
- ✓ 15. Conclusions
The call above.
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