UPDATE: Goldman Sachs Adds McKesson To Conviction List
In a note dated March 11, 2014, Goldman analyst Robert Jones added already Buy-rated McKesson (NYSE: MCK) to the Americas Conviction List and raised the price target from $208 to $215.
In describing his position on McKesson, Jones put a great deal of emphasis on the recent Celesio acquisition. In fact, Jones has modeled a synergies base run rate of $420 million ($400m procurement &$20m tax) by fiscal year 2018. This is above guidance of $275 million - $325 million which Jones has called "conservative." Furthermore, based on a comparison of Celesio's segment margins to that of US and EU peers, Jones believes there is a possibility for another $150 million of SG&A synergies by fiscal year 2018 that is not included in McKesson's guidance.
Jones continued by commenting on the possibility for McKesson's to capture generic purchasing volume stating, "We see the potential addition of $2.5-$4.5 billion in generic purchasing from large McKesson customers that still buy generics direct."
To conclude, Jones listed his EPS estimates through to fiscal year 2018 as $8.21, $11.40, $13.41, $16.11, $18.93.
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