McKesson Reports Strong Q3 FY26 Results and Raises Full-Year Adjusted EPS Guidance, Reinforcing Growth but Highlighting Valuation Risks

What happened

McKesson Corporation released its fiscal 2026 third quarter results and raised its full-year adjusted EPS guidance, signaling continued operational momentum amid high market expectations. This follows robust Q2 performance, where Oncology & Multispecialty revenue grew 32% and adjusted profit surged 71%, driven by specialty drug demand and acquisition integration. The guidance increase reflects management's confidence in sustaining double-digit EPS growth, likely supported by recent deals like Core Ventures and PRISM Vision Group. However, a critical look suggests this growth may be inflated by one-time gains and acquisition synergies, masking underlying organic trends and raising sustainability concerns. Furthermore, with shares trading near $825 and opioid litigation liabilities at $5.7B, the valuation remains stretched, underscoring the precarious balance between execution strength and risk exposure.

Implication

The raised guidance confirms McKesson's ability to leverage its oncology and specialty platforms for robust earnings, potentially supporting short-term stock appreciation. However, investors must critically assess whether this growth is driven by sustainable organic factors or relies heavily on acquisitions and non-recurring items, which could lead to future disappointments. At current price levels around $825, the stock already discounts strong adjusted EPS growth, limiting upside potential and increasing vulnerability to multiple compression. Persistent legal overhangs, such as the $2.5B West Virginia opioid lawsuit, threaten to impose additional cash outflows, potentially constraining capital returns and heightening downside risk. Therefore, while operational execution is commendable, the prudent approach remains trimming positions on strength and waiting for a more attractive entry point near $720 to mitigate valuation and legal uncertainties.

Thesis delta

The guidance raise supports the base scenario of 11-13% annual adjusted EPS growth but does not alleviate critical concerns over acquisition dependency and opioid litigation liabilities. Consequently, the overall thesis of limited upside above $880 and high downside risk remains unchanged, with no fundamental shift in the recommended 'POTENTIAL SELL' stance.