AI interpretation based on checked source excerpts. Issuer assertions and evidence limitations remain explicit.
Policy quality-scores-2: six equally weighted categories. The overall score requires full coverage. Missing inputs are not zero. Qualitative grades are sourced interpretations, not probabilities. 3/6 · 18/10/2026
Moat—
Insufficient evidence for every rubric criterion; no category score is inferred.
structural advantage · — · Distribution infrastructure and joint sourcing are established, but relative costs, entry barriers and competitive outcomes do not establish a moat.
durability · — · Recurring infrastructure disclosures and a contract extension show continuity, but cannot establish the duration of an unverified competitive advantage.
customer dependency · — · Workflow integration could create dependency, but replacement difficulty is undisclosed and franchise participation declined.
erosion resilience · — · Strong operating results coexist with participation declines and sourcing difficulties; resilience of a structural advantage remains unestablished.
Pricing power—
Insufficient evidence for every rubric criterion; no category score is inferred.
realized pricing · 2/4 · The disclosed practice of passing published supplier price changes to customers supports price transmission in both directions. Manufacturer price protection limits inventory losses, but neither demonstrates independent fee increases or price premiums.
retention · 2/4 · The CVS extension through June 2027 directly demonstrates continuity of a major relationship. Workflow integration offers indirect support for repeat demand, offset by declining Health Mart participation. No company-wide retention rate is inferred.
margin resilience · 2/4 · Quarterly aggregate segment operating profit increased, with gains in pharmaceutical and oncology operations, while technology and medical-surgical profits declined despite revenue growth. Inventory price protection helps, but reimbursement pressure and uneven segment outcomes limit the assessment. Margins alone do not establish pricing power.
contractual freedom · — · Supplier-price pass-through describes business practice, not contractual discretion. The passages omit fee-setting provisions, repricing rights and customer termination terms.
Predictability100
Five consecutive annual periods. Equal weights: nondeclining revenue frequency; revenue-growth volatility (5–40pp); positive FCF frequency; FCF-margin volatility (3–20pp). Stability indicator, not a growth forecast.
- Nondeclining revenue years (%)
- 100.00
- Revenue growth volatility (pp)
- 4.10
- Positive FCF years (%)
- 100.00
- FCF margin volatility (pp)
- 0.15
Financial strength75
Equal-weight grades: debt/FCF (1–8x), net debt/earnings before interest and tax (0–5x), interest service (1–12x), current ratio (0.75–2x). Earnings use reported operating income, or reported pretax profit plus reported interest expense when operating income is unavailable. Interest service uses earnings/interest expense; if unavailable, it uses reported operating cash flow/cash interest paid, without relabeling cash paid as accrued expense. Nonpositive cash flow/earnings score 0 for their service component; reported zero interest with a positive numerator scores 100. Net cash scores 100 for net leverage. Missing disclosures remain unavailable. General nonfinancial-company rubric, not a credit rating; exceptional and nonoperating gains are not normalized out. IFRS finance-cost and cash-flow classifications retain their reported scope.
- debtFcfGrade
- 97.98
- netDebtEbitGrade
- 91.79
- interestCoverageGrade
- 100.00
- currentRatioGrade
- 8.29
- Debt / FCF (x)
- 1.14
- Net debt / operating income (x)
- 0.41
- Interest coverage (x)
- 25.15
- Current ratio (x)
- 0.85
Capital allocation—
Missing required inputs: operatingReturn. Three-year equal-weight indicators: pretax return on average invested capital (0–25%; equity + debt − cash, each year and its prior year), share-count growth (0–5%, lower better), share-based cost/revenue (2–20%, lower better), consolidated FCF/net income (0–1x). Return uses reported operating income or, if unavailable, EBIT calculated from reported pretax profit plus reported interest expense; exceptional/nonoperating gains are not normalized out. Share-based cost uses the reported cash-flow add-back or, if absent, separately reported recognized compensation expense; the latter never becomes an FCF adjustment. Nonpositive net income scores 0 for cash conversion; absent income/FCF stays unavailable. Nonpositive invested capital has no defined return and remains unavailable. Does not establish acquisition quality or buyback timing.
- 3-year average dilution (%)
- -4.31
- 3-year average SBC / revenue (%)
- 0.06
- cashConversionGrade
- 100.00
Management63
Equal-weight average of four evidence-backed rubric grades (0–4), scaled to 100.
capital discipline · 2/4 · Fiscal 2026 operating cash flow of $6.2 billion, completed divestitures and a disclosed three-year adjusted ROIC result support capital effectiveness. However, the latest quarter combined substantial shareholder distributions with operating cash use and new secured borrowing. Acquisition-level returns and repurchase valuation benefits are unproven; adjusted ROIC is an incentive measure.
incentive alignment · 3/4 · Implemented PSUs comprise 60% of target long-term incentives and incorporate cumulative adjusted EPS, three-year ROIC and relative shareholder returns. Existing double-trigger provisions support alignment. These establish incentive design, not future earned payouts; adjusted-metric exclusions and missing ownership balances limit confidence.
execution · 3/4 · Reported fiscal 2026 revenue growth, operating profit and cash generation, subsequent aggregate segment profit growth, and completed portfolio transactions demonstrate execution. This is assessed from operating and transaction outcomes, not management praise. Declining profits in two segments and falling franchise participation prevent an exceptional grade; acquisition contributions are not separated from organic progress.
governance · 2/4 · Disclosed shareholder rights, independent oversight arrangements and actual shareholder engagement support accountability. Combining the CEO and Chair roles concentrates authority, while substantial opioid settlement obligations provide adverse historical context without establishing current control failures. The 10-of-11 independence figure concerns nominees, not a verified subsequent election result.
Evidence
Our U.S. Pharmaceutical business operates and serves customers through a network of 27 distribution centers in the U.S., including two strategic redistribution centers.
Business / North American Pharmaceutical / distribution centers · Filed 08/05/2026
We also source generic pharmaceutical drugs through our ClarusONE Sourcing Services LLP joint venture with Walmart Inc.
Business / North American Pharmaceutical / generic sourcing joint venture · Filed 08/05/2026
Our U.S. Pharmaceutical segment operates and serves customers through a network of 27 distribution centers in the U.S., including two strategic redistribution centers.
Business / U.S. Pharmaceutical / distribution centers · Filed 09/05/2025
Other Information about the Business Customers: During fiscal 2026, sales to our ten largest customers, including group purchasing organizations (“GPOs”) accounted for approximately 73% of our total consolidated revenues.
Other Information about the Business / customer concentration · Filed 08/05/2026
From time to time, we experience difficulties and delays in sourcing and selling products due to a variety of causes that result in suppliers’ failure to satisfy production demand.
Risk factors / experienced sourcing difficulties · Filed 08/05/2026
In these types of situations, our alternative sourcing efforts are not always fully successful.
Risk factors / alternative sourcing outcomes · Filed 08/05/2026
For example, we offer McKesson ConnectSM, an internet-based ordering system that provides item look-up and real-time inventory availability as well as ordering, purchasing, third-party reconciliation, and account management functionality.
Business / McKesson Connect functionality · Filed 08/05/2026
•Inventory Management – An integrated solution comprised of forecasting software and automated replenishment technologies that reduce inventory-carrying costs.
Business / integrated inventory management · Filed 08/05/2026
In fiscal 2023, we extended our pharmaceutical distribution partnership with CVS to June 2027.
Other Information about the Business / CVS partnership extension · Filed 08/05/2026
•Health Mart® – A national network of approximately 4,500 independently-owned pharmacies and one of the industry’s most comprehensive pharmacy franchise programs.
Business / fiscal 2024 Health Mart pharmacy count · Filed 08/05/2024
•Health Mart® – A national network of approximately 4,400 independently-owned pharmacies and one of the industry’s most comprehensive pharmacy franchise programs.
Business / fiscal 2025 Health Mart pharmacy count · Filed 09/05/2025
•Health Mart® – A national network of approximately 3,900 independently-owned pharmacies and one of the industry’s most comprehensive pharmacy franchise programs.
Business / fiscal 2026 Health Mart pharmacy count · Filed 08/05/2026
The business’ practice is to pass on to customers published price changes from suppliers.
MD&A / supplier price changes passed to customers · Filed 04/02/2026
Manufacturers generally provide us with price protection, which limits price related inventory losses.
MD&A / manufacturer inventory price protection · Filed 04/02/2026
31 Table of Contents McKESSON CORPORATION FINANCIAL NOTES (CONTINUED) (UNAUDITED) Financial information relating to the Company’s reportable segments and reconciliations to the consolidated totals was as follows: Three Months Ended June 30, (In millions) 2026 2025 Segment revenues (1) North American Pharmaceutical $ 86,773 $ 82,729 Oncology & Multispecialty 14,222 10,658 Prescription Technology Solutions 1,566 1,434 Medical-Surgical Solutions 2,819 2,701 Other — 305 Total revenues $ 105,380 $ 97,827 Other segment expense, net (2) North American Pharmaceutical (3) $ 85,870 $ 82,135 Oncology & Multispecialty 13,897 10,446 Prescription Technology Solutions (4) 1,340 1,181 Medical-Surgical Solutions (5) 2,697 2,480 Other — 292 Total other segment expense, net $ 103,804 $ 96,534 Segment operating profit North American Pharmaceutical $ 903 $ 594 Oncology & Multispecialty 325 212 Prescription Technology Solutions 226 253 Medical-Surgical Solutions 122 221 Other — 13 Subtotal 1,576 1,293 Corporate expenses, net (6) (191) (193) Interest expense (77) (49) Income before income taxes $ 1,308 $ 1,051 Segment depreciation and amortization (7) North American Pharmaceutical $ 39 $ 32 Oncology & Multispecialty 66 42 Prescription Technology Solutions 19 21 Medical-Surgical Solutions 26 22 Other — 3 Corporate 45 37 Total segment depreciation and amortization $ 195 $ 157 Segment expenditures for long-lived assets (8) North American Pharmaceutical $ 64 $ 61 Oncology & Multispecialty 18 24 Prescription Technology Solutions — 1 Medical-Surgical Solutions 27 25 Other — 1 Corporate 43 77 Total segment expenditures for long-lived assets $ 152 $ 189 32 Table of Contents McKESSON CORPORATION FINANCIAL NOTES (CONCLUDED) (UNAUDITED) (1)Revenues from services on a disaggregated basis represent less than 1% of the North American Pharmaceutical segment’s total revenues, approximately 7% of the Oncology & Multispecialty segment’s total revenues, approximately 39% of the Prescription Technology Solutions segment’s total revenues, and less than 1% of the Medical-Surgical Solutions segment’s total revenues.
Financial Note 13 / quarterly segment revenues and operating profits · Filed 05/08/2026
Total Revenue Earnings per Diluted Share(1) Operating Profit(2) Operating Cash Flow $403B $38.38 $6.4B $6.2B Revenue Growth Adjusted Earnings per Diluted Share(1)(3) Adjusted Operating Profit(3) Free Cash Flow(3) 12% $39.11 $6.5B $5.4B (1)Reflects continuing operations attributable to McKesson, net of tax.
Executive Compensation / fiscal 2026 financial results · Filed 12/06/2026
Refer to Financial Note 8, “Debt and Financing Activities,” to the accompanying condensed consolidated financial statements in this Quarterly Report for additional information; •As a part of our intention to separate our Medical-Surgical Solutions business into an independent company, on June 1, 2026, Apollo Funds invested approximately $1.25 billion for convertible preferred equity of Medical-Surgical Solutions business to acquire an approximately 13% interest in the business; •On April 29, 2026, our Board of Directors (the “Board”) approved the Company to repurchase up to an additional $5.0 billion shares of common stock; •During the three months ended June 30, 2026, we returned $2.6 billion of cash to shareholders through $2.5 billion of common stock repurchases and $102 million of dividend payments.
MD&A / minority investment and actual shareholder cash returns · Filed 05/08/2026
The following table summarizes the net change in cash, cash equivalents, and restricted cash for the periods shown: Three Months Ended June 30, (Dollars in millions) 2026 2025 Change Net cash provided by (used in): Operating activities $ (220) $ (918) $ 698 Investing activities (214) (3,564) 3,350 Financing activities 1,632 1,176 456 Effect of exchange rate changes on cash, cash equivalents, and restricted cash (10) 33 (43) Net change in cash, cash equivalents, and restricted cash $ 1,188 $ (3,273) $ 4,461 Operating Activities Operating activities used cash of $220 million and $918 million during the three months ended June 30, 2026 and 2025, respectively.
MD&A / quarterly operating, investing and financing cash flows · Filed 05/08/2026
44 Table of Contents MD&A Index McKESSON CORPORATION FINANCIAL REVIEW (CONTINUED) (UNAUDITED) During the three months ended June 30, 2026, certain of our subsidiaries within the Medical-Surgical Solutions segment entered into the MMS Credit Agreement for: a $750 million principal senior secured term loan due in 2031, a $250 million principal senior secured term loan due in 2028; and a $2.25 billion senior secured term loan due 2032 for total proceeds received, net of discounts and debt offering expenses, of $3.2 billion.
MD&A / Medical-Surgical secured borrowing proceeds · Filed 05/08/2026
For FY 2024 — FY 2026, the Compensation and Talent Committee applied a three-year average ROIC result of 26.43% for purposes of calculating PSU payouts.
Executive Compensation / three-year adjusted ROIC applied to PSU payouts · Filed 12/06/2026
In FY 2026, the Compensation and Talent Committee refined the design of PSUs, which continue to constitute 60% of target long-term incentive awards, to better incentivize long-term value creation, simplify the structure, and enhance alignment with shareholder outcomes.
Executive Compensation / implemented PSU design and incentive mix · Filed 12/06/2026
PSUs for the FY 2026 — FY 2028 cycle will be earned based on Cumulative Adjusted EPS (67%) and three-year average Return on Invested Capital (“ROIC”) (33%), with the resulting payout subject to a potential upward or downward adjustment of up to 20% based on McKesson’s three-year Total Shareholder Return (“TSR”) relative to a comparator group of companies.
Executive Compensation / fiscal 2026–2028 PSU performance conditions · Filed 12/06/2026
Award agreements under our 2022 Stock Plan and 2013 Stock Plan include change in control provisions which provide for “double-trigger” vesting upon an involuntary or constructive termination of employment following a change in control.
Executive Compensation / double-trigger equity vesting provisions · Filed 12/06/2026
Shareholder Rights Board of Directors Corporate Governance •Annual election of directors with majority voting standard for uncontested elections •Proxy access •Meaningful right to call special meeting of shareholders (15% ownership threshold) •No supermajority vote provisions •Lead Independent Director with robust roles and responsibilities •10 of 11 director nominees are independent •Regular executive sessions of independent directors •Annual Board and committee evaluation process •Policy requiring directors with over 12 years of tenure to offer to resign •Policies on other public company board service and retirement age of 75 •Pay for performance alignment •No poison pill •Regular Board refreshment •Comprehensive senior management succession planning process •Robust shareholder engagement program •Stock ownership guidelines for executives and directors 10 2026 Proxy Statement Proxy Summary Item Your Board’s Recommendation 2 RATIFICATION OF APPOINTMENT OF DELOITTE & TOUCHE LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR FISCAL YEAR 2027 Deloitte & Touche LLP (D&T) is an independent accounting firm with the breadth of expertise and knowledge necessary to audit the Company.
Proxy Summary / shareholder rights, governance practices and director nominees · Filed 12/06/2026
Brian S. Tyler, who has served as McKesson’s Chief Executive Officer since 2019 and has led the Company’s transformation into a diversified healthcare services leader, assumed the additional role of Chair of the Board, effective May 1, 2026.
Board letter / CEO appointment as Chair effective May 1, 2026 · Filed 12/06/2026
Over the past year, management and members of our Board reached out to shareholders representing approximately 60% of our outstanding common stock and they engaged with shareholders representing approximately 46% of our outstanding common stock on topics including Board composition and refreshment, executive compensation and oversight of emerging areas such as artificial intelligence (AI).
Board letter / actual shareholder engagement · Filed 12/06/2026
Funds necessary for future debt maturities and our other cash requirements, including any future payments that may be made related to our total estimated litigation liability of $5.7 billion as of June 30, 2026 payable under the terms of various settlement agreements for opioid-related claims, are expected to be met by existing cash balances, cash flow from operations, existing credit sources, and future borrowings.
MD&A / estimated opioid settlement liability and funding expectations · Filed 05/08/2026
Norway On January 30, 2026, the Company completed the sale of its retail and distribution businesses in Norway (“Norway disposal group”) for an adjusted purchase price of $821 million.
Financial Note 2 / completed Norway divestiture · Filed 05/08/2026
For example, certain changes in reimbursement methodologies (including government rates) for pharmaceuticals, medical treatments, and related services reduce profit margins for us and our customers and impose new legal requirements on healthcare providers.
Risk factors / reimbursement changes reducing margins · Filed 08/05/2026
•Adjusted Earnings per Diluted Share (Non-GAAP) and 3-Year Cumulative Adjusted Earnings per Diluted Share (Non-GAAP): We define Adjusted Earnings per Diluted Share as GAAP earnings per diluted common share from continuing operations attributable to McKesson, excluding per share impacts of amortization of acquisition-related intangibles, transaction-related expenses and adjustments, LIFO inventory-related adjustments, gains from antitrust legal settlements, restructuring, impairment, and related charges, claims and litigation charges, other adjustments as well as the related income tax effects for each of these items, as applicable, divided by diluted weighted-average shares outstanding.
Appendix A / exclusions from adjusted earnings · Filed 12/06/2026
