McKesson Corporation (NYSE:MCK) shares are trading down more than 5 percent on Thursday as sales and margins were weaker than estimated. As a result, S&P Capital IQ analyst Agnese reduced his price target from $156 to $148 reflecting a PE of 12.2X, which is 10 percent below peers, and his EPS estimate of $12.16 for the fiscal year ending March 2018.
Incidentally, the analyst reduced his EPS estimate for McKesson from $13.05 to $12.16 for the fiscal year 2018. However, the brokerage boosted its EPS view by 15 cents to $12.75 for the fiscal year 2017. The move followed after the company reported adjusted EPS of $3.03 for the December quarter, which was eight cents above the Capital IQ estimate because of lower taxes.
The analyst does not expect the lower tax to continue in the fiscal year 2018. In his research note to clients, the analyst viewed, “Sales and margins were weaker than we expected on intense pricing pressure and on lower inflationary drug pricing, partially offset by specialty drug growth and acquisitions. MCK agrees to acquire CoverMyMeds for $1.1 billion, which we see improving technology capabilities.”
Corridore retained his Hold rating on McKesson shares, which is trading down 5.72 percent at last check.