McKesson to Buy Emendo - Analyst Blog

By Zacks | November 07, 2012 AAA

McKesson Corporation (MCK) recently announced that it has inked a deal with Emendo Ltd. to acquire the latter. Emendo has developed CapPlan, which is utilized in more than 40 hospitals across New Zealand, Australia, Canada and the UK to optimize operational efficiency by forecasting patient demand and plan resourcing.

CapPlan is a system which forecasts workloads covering long-term and short-term trends. It helps hospitals to allocate resources efficiently and recognize unnecessary costs. CapPlan uses clinician schedules, workloads, patient flow, length of stay and discharges in its forecasting process. The company stated that a 400-bed hospital using CapPlan has saved $895,000 for inpatient areas. We believe the acquisition of Emendo will complement McKesson's technology solutions segment.

The company has been pursuing acquisitions regularly to supplement organic growth. Last month, McKesson entered into an agreement to buy PSS World Medical, Inc. (PSSI) for $29.00 per share in cash. The total value of the deal, in which McKesson will assume PSS World Medical's debt, is estimated to be approximately $2.1 billion. McKesson expects to generate more than $100 million in annual savings (pre-tax) by the fourth year after the closure of the deal. On the second quarter 2013 conference call, the company stated that the deal is expected to add earnings of 15 to 25 cents per share after a year of closing.

The company also announced that it will purchase Med3000, a health care management and technology service company. The deal, expected to be completed in the next few months, should boost the medical billing and practice management services of revenue management solutions at McKesson apart from facilitating its expansion into high potential markets.

Neutral on McKesson

We currently have a Neutral recommendation on McKesson. The stock carries a Zacks #3 Rank (Hold rating) in the short run.

We are encouraged by the company's acquisition strategy for expansion but the competition in the pharmaceutical distribution market remains tough, which includes players like AmerisourceBergen Corporation's (ABC).

comments powered by Disqus
Related Analysis
  1. India Remains An Emerging Market Bright Spot
    Stock Analysis

    India Remains An Emerging Market Bright Spot

  2. Consumer Spending Keeps In Line - Ahead of Wall Street
    Stock Analysis

    Consumer Spending Keeps In Line - Ahead of Wall Street

  3. Bear of the Day: IXIA (XXIA) - Bear of the Day
    Stock Analysis

    Bear of the Day: IXIA (XXIA) - Bear of the Day

  4. Bull of the Day: Southwest Airlines (LUV) - Bull of the Day
    Stock Analysis

    Bull of the Day: Southwest Airlines (LUV) - Bull of the Day

  5. Barron's Recap: Investing Like A Tech Tycoon
    Stock Analysis

    Barron's Recap: Investing Like A Tech Tycoon

Trading Center