As previously reported, Credit Suisse downgraded McKesson (MCK) to Underperform from Neutral and lowered its price target to $131 from $150. Analyst Robert Willoughby believes AmerisourceBergen (ABC) and Cardinal Health (CAH) have material competitive advantages in their generic sourcing capabilities from a committed capital standpoint versus McKesson, and both companies appear better positioned to win and retain business without diluting profit opportunities. Further, the analyst said McKesson's average invested capital base is about equal to the sum of its competitors, and sees higher capital requirements and lower earnings ahead.

Evercore ISI says that while neither OptumRx nor Cardinal Health (CAH) would confirm the winner of the contract, McKesson (MCK) confirmed it had won the contract beginning in July. Cardinal this morning announced that its pharmaceutical distribution contracts with OptumRx, which represented 16% of fiscal 2023 revenue, is expiring at end of June and will not be renewed. Evercore estimates the win would represent a 50c-65c earnings per share benefit to McKesson on a full-year basis or likely half of that given the contract does not start until July. The firm does not see Cardinal's announcement as "heralding a broadly more competitive period for the distributors, but rather a one-off contract shift given what was likely an off-market contract."