Safer pricing pays off for McKesson

Article Excerpt

MCKESSON CORP. $53 (New York symbol MCK; WSSF Rating: Average) has doubled in the past year, partly due a change in the way it supplies drugs to retail pharmacies, hospitals and clinics. In the past, McKesson earned most of its profit from the spread between the price it paid for bulk drugs, and the price it charged its customers. Speculating in drug prices like this added to its risk. But new supply agreements with major drugmakers gave the company more predictable revenue streams. The recent settlement of a long-standing class-action lawsuit also cut its risk. Thanks to this new policy, McKesson’s income in its second fiscal quarter ended September 30, 2005 rose 82.8%, to $0.53 a share (total $167 million) from $0.29 a share ($86 million) a year earlier. If you exclude a $13 million gain from the sale of a division, profit rose 69%. Revenue grew 8.5%, to $21.6 billion from $19.9 billion, due to acquisitions and strong demand for software…

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