Head-To-Head Comparison: AmerisourceBergen Corp. (ABC) versus McKesson Corporation (MCK)

AmerisourceBergen Corp. (NYSE: ABC) and McKesson Corporation (NYSE:MCK) are both large-cap non-cyclical consumer goods & services companies, but which is the better business? We will contrast the two companies based on the strength of their earnings, dividends, institutional ownership, profitabiliy, valuation, analyst recommendations and risk.

Analyst Recommendations

This is a summary of recent ratings and target prices for AmerisourceBergen Corp. and McKesson Corporation, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
AmerisourceBergen Corp. 0 6 7 0 2.54
McKesson Corporation 1 10 7 0 2.33

AmerisourceBergen Corp. presently has a consensus price target of $94.46, indicating a potential upside of 2.08%. McKesson Corporation has a consensus price target of $170.20, indicating a potential upside of 6.49%. Given McKesson Corporation’s higher probable upside, analysts plainly believe McKesson Corporation is more favorable than AmerisourceBergen Corp..

Dividends

AmerisourceBergen Corp. pays an annual dividend of $1.46 per share and has a dividend yield of 1.6%. McKesson Corporation pays an annual dividend of $1.12 per share and has a dividend yield of 0.7%. AmerisourceBergen Corp. pays out 28.2% of its earnings in the form of a dividend. McKesson Corporation pays out 4.8% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. AmerisourceBergen Corp. has raised its dividend for 12 consecutive years and McKesson Corporation has raised its dividend for 4 consecutive years. AmerisourceBergen Corp. is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Valuation and Earnings

This table compares AmerisourceBergen Corp. and McKesson Corporation’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
AmerisourceBergen Corp. $149.76 billion 0.13 $2.34 billion $5.17 17.90
McKesson Corporation $198.53 billion 0.17 $4.35 billion $23.34 6.85

McKesson Corporation has higher revenue and earnings than AmerisourceBergen Corp.. McKesson Corporation is trading at a lower price-to-earnings ratio than AmerisourceBergen Corp., indicating that it is currently the more affordable of the two stocks.

Risk and Volatility

AmerisourceBergen Corp. has a beta of 0.93, meaning that its share price is 7% less volatile than the S&P 500. Comparatively, McKesson Corporation has a beta of 1.15, meaning that its share price is 15% more volatile than the S&P 500.

Profitability

This table compares AmerisourceBergen Corp. and McKesson Corporation’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
AmerisourceBergen Corp. 1.11% 71.05% 4.83%
McKesson Corporation 2.55% 29.99% 4.88%

Institutional & Insider Ownership

70.5% of AmerisourceBergen Corp. shares are held by institutional investors. Comparatively, 89.9% of McKesson Corporation shares are held by institutional investors. 27.4% of AmerisourceBergen Corp. shares are held by company insiders. Comparatively, 1.2% of McKesson Corporation shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Summary

McKesson Corporation beats AmerisourceBergen Corp. on 10 of the 16 factors compared between the two stocks.

AmerisourceBergen Corp. Company Profile

AmerisourceBergen Corporation is a pharmaceutical sourcing and distribution services company. The Company’s segments include Pharmaceutical Distribution and Other. The Company provides services to healthcare providers, and pharmaceutical and biotech manufacturers. As of June 30, 2016, the Pharmaceutical Distribution segment consists of two operating segments, including the operations of AmerisourceBergen Drug Corporation (ABDC) and AmerisourceBergen Specialty Group (ABSG), which distributes specialty drugs to their customers. Servicing healthcare providers in the pharmaceutical supply channel, the Pharmaceutical Distribution segment’s operations provide drug distribution and related services. The Other segment consists of the operations of various segments, including the AmerisourceBergen Consulting Services (ABCS), the World Courier Group, Inc. and the MWI Veterinary Supply, Inc. ABSG operates distribution facilities that focus primarily on complex disease treatment regimens.

McKesson Corporation Company Profile

McKesson Corporation (McKesson) is engaged in delivering pharmaceuticals, medical supplies and healthcare information technology. The Company operates through two segments: McKesson Distribution Solutions and Technology Solutions. The McKesson Distribution Solutions segment distributes drugs and equipment, and health and beauty care products across North America and internationally. The Distribution Solutions segment provides pharmaceutical solutions for biotech and pharmaceutical manufacturers, and practice management, technology, clinical support and business solutions to oncology and other specialty practices operating in the community setting. The Technology Solutions segment delivers clinical, patient care, financial, supply chain and strategic management software solutions, as well as connectivity, outsourcing and other services. Its McKesson Health Solutions portfolio includes ClarityQx, which is a payment technology.

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