Financial Trends -- 7/10
High-quality, margin-led financial profile with two firmly positive trends and one drag. Adjusted
operating margin is expanding (+44 bps off trough) with operating profit (+15% annual) outgrowing
revenue (+12%) -- genuine operating leverage. Diluted share count is in a durable ~5%/yr decline
backed by an enlarged buyback authorization, and FCF is positive and growing annually. The drag is
revenue, where YoY growth decelerated through FY2026 (from +23% on an easy comp to +6% in FQ4) and
FY2027 guidance resets the top line to +5-9%. No mandatory penalties trigger. Net: 7/10.
Weight: 25%
Quarterly Metrics -- Last 8 Fiscal Quarters (YoY on comparable quarters)
| Metric | FQ1'25 | FQ2'25 | FQ3'25 | FQ4'25 | FQ1'26 | FQ2'26 | FQ3'26 | FQ4'26 |
|---|---|---|---|---|---|---|---|---|
| Revenue ($M) | 79,283 | 93,651 | 95,294 | 90,823 | 97,827 | 103,150 | 106,158 | 96,295 |
| Revenue YoY | — | — | — | — | +23.4% | +10.1% | +11.4% | +6.0% |
| Adj Gross Profit ($M) | 3,060 | 3,246 | 3,342 | 3,388 | 3,264 | 3,534 | 3,662 | 3,862 |
| Adj Gross Margin | 3.86% | 3.47% | 3.51% | 3.73% | 3.34% | 3.43% | 3.45% | 4.01% |
| Adj Op Profit ($M) | 1,305 | 1,291 | 1,463 | 1,559 | 1,424 | 1,632 | 1,652 | 1,757 |
| Adj Op Profit YoY | — | — | — | — | +9.1% | +26.4% | +12.9% | +12.7% |
| Adj EPS ($) | 7.88 | 7.07 | 8.03 | 10.12 | 8.26 | 9.86 | 9.34 | 11.69 |
| Adj EPS YoY | — | — | — | — | +4.8% | +39.5% | +16.3% | +15.5% |
| Free Cash Flow ($M) | (1,547) | 1,882 | (2,579) | 7,470 | (1,107) | 2,224 | 1,057 | 3,236 |
| Diluted Shares (M) | 130.7 | 129.3 | 126.6 | 125.9 | 125.5 | 124.4 | 123.7 | 122.7 |
Revenue is the one drag: YoY decelerated from +23.4% (FQ1'26, easy comp)
to +6.0% (FQ4'26). Offsetting it, adjusted operating profit compounded +12-26% every FY26
quarter and adjusted EPS grew double-digit in three of four -- profit outgrowing the top line is the
signature of the model's operating leverage. FCF is intra-year lumpy (negative FQ1/FQ3) -- normal
distributor working-capital seasonality -- but positive and growing on an annual basis.
Annual Financial Summary (FY ends March 31)
| Metric | FY2022 | FY2023 | FY2024 | FY2025 | FY2026 |
|---|---|---|---|---|---|
| Revenue ($M) | 263,966 | 276,711 | 308,951 | 359,051 | 403,430 |
| Rev YoY | — | +4.8% | +11.7% | +16.2% | +12.4% |
| Adj EPS ($) | 23.69 | 25.94 | 27.44 | 33.05 | 39.11 |
| Adj EPS YoY | — | +9.5% | +5.8% | +20.4% | +18.3% |
| Adj Gross Profit ($M) | 13,208 | 12,230 | 12,427 | 13,036 | 14,322 |
| Adj Op Profit ($M) | n/a | n/a | 4,901 | 5,618 | 6,465 |
| Adj Op Profit YoY | — | — | — | +14.6% | +15.1% |
| Free Cash Flow ($M) | 3,899 | 4,601 | 3,627 | 5,226 | 5,410 |
| FCF Margin | 1.48% | 1.66% | 1.17% | 1.46% | 1.34% |
| Diluted Shares (M) | 154.1 | 142.2 | 134.1 | 128.1 | 124.1 |
| Total Debt ($M) | 5,879 | 5,594 | 5,629 | 5,654 | 6,526 |
Key trends
- Revenue compounding ~11% over five years: From $264.0B (FY2022) to $403.4B (FY2026), growth re-accelerated into FY2025 (+16.2%) then eased to +12.4% in FY2026
- Adj EPS compounding ~13% CAGR: From $23.69 to $39.11 across five years, with +18-20% growth in the two most recent years
- Margin-led leverage: Adjusted operating profit grew +15.1% in FY2026, outpacing revenue at +12.4% -- profit compounding faster than the top line
- Share count declining ~5%/yr: Diluted shares fell from 154.1M (FY2022) to 124.1M (FY2026), a ~19% cumulative reduction, buyback-driven with no dilution
Segment Revenue -- Quarterly ($M, YoY on FQ4'26 vs FQ4'25)
Segment Revenue -- Annual ($M, FY2025 vs FY2026)
Oncology is the growth engine: +31.4% for FY2026. The core
NA Pharmaceutical book (~83% of revenue) grows in the double digits on GDP-plus volume and
specialty/GLP-1 mix, while Oncology & Multispecialty compounds at ~31% as MCK vertically
integrates into the provider demand side. The only laggard is Medical-Surgical (+1.1%) -- the
~3%-of-revenue segment management has announced it will separate.
Free Cash Flow ($M, Annual)
FCF positive and growing on an annual basis. FY2026 FCF of
$5.41B is above FY2025's $5.23B and well ahead of FY2022's $3.90B. Intra-year prints swing negative
in FQ1 and FQ3 -- normal distributor working-capital seasonality, not deterioration. The one watch
item is the FY2027 guide ($4.5-4.9B), which dips below FY2026 actual and needs monitoring on
cash-conversion terms (covered in Concerns & Risks).
Blemishes -- Not Operational Deterioration
| Blemish | Detail | Penalty |
|---|---|---|
| Revenue Deceleration | YoY growth eased from +23.4% (FQ1'26, easy comp) to +6.0% (FQ4'26); FY2027 guide resets to +5-9%. The "accelerating revenue" leg of a 10 is absent -- but operating profit still outgrows revenue. | Caps at 7 |
| Modest Debt Step-Up | Total debt rose to ~$6.5B in FY2026 (from ~$5.7B) on FQ1/FQ2 draw; did not persist for 3+ quarters and net debt/EBITDA remains 0.66x. | None |
| FY27 FCF Guide Dip | FY2027 FCF guide ($4.5-4.9B) below FY2026 actual ($5.41B) despite +10% AOP -- a cash-conversion yellow flag flagged as timing. | Watch |
The one real drag is revenue trajectory, not the core model.
Adjusted operating margin is expanding, operating profit is outgrowing the top line, the share count
is shrinking ~5%/yr, and FCF is positive and growing annually. None of the mandatory penalties trip:
FCF is positive, there is no dilution, operating income is rising, and the debt step-up did not
persist. Decelerating revenue keeps this off a higher score, not any operational deterioration.
Score Rationale
Score of 7/10 reflects a high-quality, margin-led compounder held below the top of the range by decelerating revenue. No penalty modifiers applied.
Supports 7/10:
- Adjusted operating profit +15.1% (FY2026) outgrowing revenue +12.4% -- genuine operating leverage
- Adjusted operating margin expanding ~44 bps off trough; latest quarter +10 bps YoY
- Diluted share count declining ~5%/yr (154.1M to 124.1M over five years), backed by an enlarged buyback authorization -- no dilution
- FCF positive and growing annually ($3.90B FY2022 to $5.41B FY2026)
- Five-year adjusted EPS CAGR of ~13% ($23.69 to $39.11), with +18-20% in the two latest years
Held to 7 (no penalty):
- Revenue YoY decelerated from +23% to +6% through FY2026; FY2027 guide resets to +5-9% -- the "accelerating" leg of a 10 is missing
- FCF is intra-year lumpy (negative FQ1/FQ3) -- seasonal, not deteriorating
- FY2027 FCF guide dips below FY2026 actual -- a cash-conversion watch item, not yet a penalty
Data sourced from Daloopa (company_id: 482). Fiscal year ends March 31. Fiscal quarters lag calendar by one (FQ4 FY26 = calendar 2026Q1). All financials in USD.