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McKesson's Compounding Keeps Adding Up
Submitted by Peter Frank. Publication Date: 7/31/2026.
Key Points
- McKesson closed fiscal 2026 with $403.4 billion in revenue, up 12%, and adjusted EPS of $39.11, an 18% increase that topped its own targets.
- The company issued fiscal 2027 adjusted EPS guidance of $43.80 to $44.60, projecting 12% to 14% growth, while expanding its share-repurchase authorization to $7.7 billion.
- Analysts hold a consensus Moderate Buy rating with roughly 11% average upside, though McKesson's stock trades at a valuation that already reflects strong expected growth.
- Special Report: Everyone wanted SpaceX. Smart money wants this.
McKesson (NYSE: MCK) keeps moving medicines around the country, keeping revenue flowing.
The company operates in the unglamorous middle of healthcare. It distributes enormous amounts of pharmaceuticals, serves specialty medical practices and, behind the scenes, has been reshaping its business mix.
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Click here to learn this company's name for free todayThis combination of steady operations and strategic focus has made McKesson one of the more consistent winners in the market over the past several years.
Analysts and investors have taken notice. The company’s continued growth, strong cash flow and expanding earnings have not gone unnoticed. The question for new investors is how patient they are and whether the potential upside is worth it.
Strong Results Continue
McKesson closed out fiscal 2026 on a strong note. In its fourth quarter, which ended March 31, revenue came in at $96.3 billion, up 6% but below analysts’ expectations. Earnings per diluted share reached $13.71, an increase of $3.70. Growth was driven by higher prescription volumes in its North American Pharmaceutical operations and continued expansion in Oncology & Multispecialty. Adjusted earnings per diluted share rose 16% to $11.69, exceeding analysts’ expectations.
For the full fiscal year, McKesson delivered consolidated revenue of $403.4 billion, up 12%, while earnings per share (EPS) climbed to $38.38. Adjusted EPS reached $39.11, an 18% increase that exceeded the company’s previously announced long-term growth targets.
Cash Flow Fuels Growth
As a distributor, McKesson’s business also generates substantial cash. During the quarter, the company produced $3.4 billion in cash flow from operations and about $3.2 billion in free cash flow after $185 million in capital expenditures.
For the year, McKesson generated $6.2 billion in cash flow from operations. The resulting free cash flow provides ample funds for investment in oncology and specialty capabilities, as well as continued share repurchases.
Indeed, the company said it launched a $2.25 billion accelerated share-repurchase program. The board also approved a $5 billion increase to its overall repurchase authorization, lifting total buyback capacity to $7.7 billion as of April.
Guidance Keeps Rising
Given its results, the company again raised its forward guidance. In February, McKesson raised and narrowed its fiscal 2026 adjusted EPS guidance to a range of $38.80 to $39.20, up from an earlier range of $38.35 to $38.85.
When announcing its latest results in May, the company went a step further, issuing fiscal 2027 guidance of $43.80 to $44.60 in adjusted earnings per diluted share, implying 12% to 14% growth. It also reaffirmed its long-term adjusted EPS growth target of 13% to 16%.
The Business Keeps Evolving
As McKesson looks ahead, it is also reviewing its business mix and actively reshaping aspects of its operations.
In February, the company completed the sale of its Norwegian retail and distribution businesses to NorgesGruppen as part of a plan to exit European operations entirely.
Earlier in the fiscal year, McKesson also took controlling interests in PRISM Vision Holdings and Core Ventures, expanding its footprint in ophthalmology, oncology and specialty practice support. These investments continue the company’s focus on a higher-value business mix rather than simply moving pharmaceuticals.
Wall Street Stays Bullish
Given its track record, McKesson has attracted significant support on Wall Street.
The 17 analysts following the stock have a consensus Moderate Buy rating, with 14 recommending Buy and three suggesting Hold. With a 12-month average target price of $962.67 per share, the potential upside is moderate given the shares’ persistent strength. The highest target is $1,085 per share, while the lowest is $812.
Shares suffered a setback earlier this year when the stock pulled back from its 52-week high near $1,000. The decline primarily reflected market sentiment and likely some profit-taking. Its price-to-earnings ratio of roughly 23 remains in line with similar companies in the medical sector, including Cencora (NYSE: COR), yet remains well below Cardinal Health (NYSE: CAH).
McKesson does pay a quarterly dividend and recently raised it 15% to 94 cents per share, marking the company’s 17th consecutive annual increase. However, the yield of just 0.4% means the stock is not primarily an income investment.
Steady Growth Carries Some Risks
Instead, investors turn to McKesson for its consistency and steady appreciation. The company combines a massive distribution business with a growing specialty platform, strategic acquisitions, notable free cash flow, aggressive buybacks and a history of guidance pointing to disciplined, long-term growth.
There are risks, including payment defaults, policy shifts, supply disruptions and competition, that can surface unexpectedly. The stock price itself is also no bargain, having built in expectations for growth that could be challenging to sustain.
Even so, investors looking to avoid cyclical stocks in a market that rewards operational consistency might want to keep McKesson on their watchlist.
Datadog’s Drop Says More About Expectations Than Earnings
Submitted by Sam Quirke. Publication Date: 8/7/2026.
Key Points
- Datadog shares fell about 19% despite beating revenue and earnings expectations and raising full-year guidance well above forecasts.
- The drop stemmed from sky-high expectations after a big prior rally and news that its largest customer would reduce usage.
- Analysts remain bullish, citing Raymond James' Outperform rating and a $280 price target alongside MarketBeat's Moderate Buy consensus.
- Special Report: Everyone wanted SpaceX. Smart money wants this.
Every so often, the market serves up a reaction so at odds with the underlying news that it's worth asking what investors are really thinking. Datadog Inc. (NASDAQ: DDOG) delivered one such moment this week when the observability software company followed up an excellent quarter with a 19% drop in its share price.
On the face of it, this makes little sense. Datadog beat expectations for both revenue and earnings, comfortably raised its guidance for the rest of the year and pointed to demand trends that were, if anything, accelerating. These aren't the hallmarks of a company in trouble, yet the shares slumped regardless, leaving investors to puzzle over what the market found so disappointing.
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Click here to learn this company's name for free todayThe answer, as is so often the case, has less to do with the results themselves and more to do with the towering expectations that preceded them. For those willing to look past the knee-jerk reaction, that disconnect may have opened up an opportunity.
A Quarter That Beat on Almost Every Measure
Start with the numbers, because they were hard to fault. Revenue grew 36% year over year, coming in above the top end of the company's own guidance and marking the fastest growth Datadog has posted in several years. Earnings jumped sharply, too, comfortably exceeding analyst expectations.
The strength ran deeper than the headline figures. The company generated healthy free cash flow, while metrics that speak to future demand—billings and the value of contracted work still to be delivered—both grew even faster than revenue. That's a strong sign that customers aren't just spending more today but are committing to spend more down the line.
Perhaps most reassuringly, the growth was broad-based rather than narrowly concentrated. Demand from customers outside the artificial intelligence (AI) boom actually accelerated, showing that Datadog's success isn't solely dependent on a single fashionable theme. On top of all that, management raised its full-year outlook well above expectations.
So Why Did the Stock Tumble?
If the quarter was so strong, the sell-off demands an explanation, and it comes down to two things. The first is how much success had already been priced in. The stock had already staged a massive 2026 rally heading into the report, setting an extraordinarily high bar for the quarter.
When a stock has already staged that kind of rally, merely being excellent is sometimes not enough to prevent profit-taking. Indeed, this is a theme we've seen play out several times already during the current earnings season.
The second, more specific concern about Datadog's trajectory involved a single large customer. Management disclosed that its biggest client, widely believed to be a major AI chatbot company, would reduce its usage beginning in the current quarter, a change that was duly reflected in the updated guidance.
In a market hypersensitive to any hint of slowing momentum, that disclosure alone was enough to spook investors.
Reading Between the Lines of the Reaction
Here’s where it pays to separate the noise from the signal. A pullback from one large customer sounds alarming. Still, Datadog spreads its revenue across thousands of customers, with the vast majority of recurring revenue coming from a broad base of larger accounts rather than any single name.
Even as one major client trims its spending, the underlying engine of growth—and the thousands of businesses steadily expanding their use of Datadog's tools—should continue to hum along.
In other words, the very concern that spooked the market may prove far less significant than the reaction implied. One customer pulling back is a manageable bump for a business this broadly diversified, not the structural crack that a double-digit share-price fall might suggest.
Weighing the Opportunity Against the Risks
None of this is to dismiss the bears entirely, because they hold one especially strong card: valuation. Even after the drop, Datadog still trades at a triple-digit price-to-earnings ratio, leaving little room for error and requiring the company to keep growing rapidly for years to justify its price.
For those of us on the sidelines, however, there's no doubt that this was, by almost any measure, a strong report from a dominant company that's still growing quickly and generating plenty of cash.
Consider Raymond James' reiterated Outperform rating on Datadog shares and its $280 price target for context, not to mention MarketBeat's consensus rating of Moderate Buy.
Sure, the market is choosing, for now at least, to focus on the blemishes rather than the substance. In doing so, it may be handing longer-term believers a golden opportunity to get involved.
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