MCK Plunges 6.8% on Earnings Optimism: What’s Fueling the Selloff?

Summary
• McKesson (MCK) slumps 6.8% intraday to $655.83, despite Q1 earnings and revenue beating estimates.
• Earnings per share of $8.26 outperformed the $8.23 consensus, while revenue surged 23.4% to $97.83 billion.
• After-hours trading saw shares drop 1.5% following the spin-off announcement of its Medical-Surgical Solutions segment.

McKesson’s sharp intraday decline defies its strong Q1 results, driven by a strategic shift to spin off its surgical business. The stock’s 6.8% drop from its $689.04 open to a low of $655.01 reflects investor caution over the spin-off’s execution risks and near-term operational clarity. With the healthcare sector mixed and the S&P 500 up 6.9% year-to-date, MCK’s 22.2% YTD gain contrasts with its volatile session.

Spin-Off Uncertainty Overshadows Earnings Beat
McKesson’s intraday selloff stems from a strategic pivot to spin off its Medical-Surgical Solutions segment, announced alongside its Q1 results. While the segment reported $2.7 billion in revenue and $244 million in adjusted operating profit, the decision to separate it into an independent entity has introduced execution risks and short-term uncertainty. Investors are pricing in potential operational disruptions and the loss of a high-margin business, despite the company’s 23.4% revenue growth and raised EPS guidance. The after-hours dip of 1.5% underscores skepticism about the spin-off’s timeline and the remaining business’s ability to sustain growth without the surgical segment’s contributions.

Healthcare Distributors Mixed as MCK Dips
The healthcare distribution sector, led by peers like AmerisourceBergen (ABG) with a -0.427% intraday move, shows mixed momentum. While McKesson’s spin-off announcement creates near-term volatility, its core pharmaceutical and specialty distribution businesses remain robust. The sector’s broader context—marked by rising demand for specialty drugs and automation-driven efficiency—supports long-term growth, but MCK’s strategic shift may temporarily underperform as investors weigh execution risks against its 22.2% YTD outperformance.

Options and Technicals: Navigating MCK’s Volatility
• 200-day average: 646.21 (below current price)
• RSI: 45.58 (oversold)
• MACD: -3.11 (bearish divergence)
• Bollinger Bands: 698.56–720.73 (current price near lower band)

MCK’s technicals suggest a short-term bearish trend but a long-term bullish setup. The stock is trading near its 200-day average and RSI in oversold territory, hinting at potential rebound. Key levels to watch: the 200-day average at $646.21 (support) and the Bollinger Band upper bound at $720.73 (resistance).

Top Options Picks:
• MCK20250815C650
- Strike: $650 | Expiration: 2025-08-15 | IV: 26.39% | Delta: 0.54 | Theta: -2.04 | Gamma: 0.0147 | Turnover: 1,200
- IV: High volatility suggests market uncertainty; Delta: 0.54 indicates moderate sensitivity to price moves; Theta: -2.04 implies rapid time decay, favoring short-term traders.
- Payoff (5% downside): $655.83 → $623.04 → max gain of $27.04 per share. This call option offers leverage (54.32%) and liquidity, ideal for capitalizing on a rebound from oversold levels.

• MCK20250815C660
- Strike: $660 | Expiration: 2025-08-15 | IV: 29.01% | Delta: 0.41 | Theta: -1.73 | Gamma: 0.0131 | Turnover: 11,677
- IV: Elevated volatility aligns with near-term uncertainty; Delta: 0.41 suggests lower sensitivity but higher gamma (0.0131) for potential acceleration if the stock recovers.
- Payoff (5% downside): $655.83 → $623.04 → max gain of $17.04 per share. This contract’s high turnover and moderate leverage (76.68%) make it a balanced bet for a rebound.

Action Insight: Aggressive bulls may consider MCK20250815C650 into a bounce above $650, while cautious traders might target MCK20250815C660 for a controlled play on the 200-day average breakout.

Backtest McKesson Stock Performance
McKesson Corporation (MCK) has historically shown positive short-to-medium-term gains following a -7% intraday plunge. The backtest data reveals favorable win rates and returns for various time frames:1. 3-Day Win Rate and Return: The win rate is 61.01%, with an average return of 0.67% within 3 days after the intraday plunge. This indicates a higher probability of a positive rebound in the short term.2. 10-Day Win Rate and Return: The win rate increases to 63.94%, with an average return of 1.79% over 10 days. This suggests that the positive momentum tends to persist and even strengthen in the medium term.3. 30-Day Win Rate and Return: The win rate reaches 75.63%, with an average return of 4.75% over 30 days. This demonstrates a high likelihood of a robust recovery and continued growth in the immediate aftermath of the significant intraday drop.4. Maximum Return: The maximum return observed following the intraday plunge is 8.93% over 59 days, which is a notable upside opportunity if the recovery happens swiftly.In conclusion, MCK has been favorable to investors who take a short-to-medium-term view after a -7% intraday plunge. The high win rates and positive returns suggest that such events can be viewed as buying opportunities, potentially leading to decent gains in the following weeks. However, it's important to note that past performance is not always indicative of future results, and investors should consider their risk tolerance and investment horizon when making decisions.

MCK’s Crossroads: Spin-Off Risks vs. Long-Term Growth
McKesson’s intraday selloff reflects near-term uncertainty from its surgical segment spin-off, but its core business remains resilient with strong specialty drug demand and automation-driven efficiency. Investors should monitor the spin-off’s execution and the stock’s ability to hold above $646.21 (200-day average) for a potential rebound. The healthcare sector’s mixed performance, led by ABG’s -0.427% move, highlights the need for sector diversification. For now, focus on key technical levels and the options chain’s liquidity-rich contracts to position for volatility. Watch for a $650 breakout or a breakdown below $646.21 to gauge the next move.