Why did McKesson's net profit fluctuate in 2024?


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McKesson's net profit fluctuated in 2024 due to a combination of factors influencing both the revenue and expense sides of the company's financials:
- Revenue Growth: McKesson's consolidated revenues increased by 12% to $309.0 billion in fiscal 2024, primarily driven by a 12% rise in the U.S. Pharmaceutical segment, which benefited from higher prescription volumes and an expanded range of specialty products1. The Prescription Technology segment also saw a 23% increase in adjusted operating profit, fueled by high demand for its innovative solutions that saved patients over $8.8 billion on medications2.
- Adjusted Earnings Per Share (EPS): Although the adjusted EPS increased by 6% to $27.44, this growth was slightly below the forecast of $27.591. The annual EPS stood at $22.39, which was down from $25.05 in the previous year1. This decline in EPS, despite revenue growth, suggests that the company's cost management or operational efficiency may have been impacted, leading to a fluctuation in net profit.
- Operating Expenses: Operating expenses for McKesson increased by 11% to $2.1 billion, driven by higher costs to support growth2. These increased expenses could have partially offset the revenue gains, affecting profit margins and ultimately leading to a fluctuating net profit.
- Strategic Investments and Acquisitions: McKesson's expansion into the U.S. Oncology Network and its successful biopharma services platform enhancements through strategic investments and acquisitions could have been costly in the short term, impacting net profit2. The company's free cash flow for fiscal 2024 was $3.6 billion, indicating its ability to fund growth initiatives while returning value to shareholders2.
- Challenges and Reserves: McKesson faced challenges, including a reserve for environmental matters within the corporate segment, which may indicate potential liabilities related to past business activities2. Such reserves can impact net profit by reflecting past costs that may not have been fully accounted for in current earnings.
In summary, McKesson's net profit fluctuated in 2024 due to a complex interplay of revenue growth, particularly in its Pharmaceutical and Prescription Technology segments, adjustments in expense management, and strategic investments. The company's financial performance was influenced by both internal operational efficiencies and external market dynamics, leading to a mixed financial outcome with a reported net income of $3.16 billion for the year3.
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