Why is McKesson dropping?

McKesson's stock is dropping primarily due to the company issuing lower-than-expected profit guidance for the second quarter and its strategic decision to sell its Canada-based businesses.

Understanding McKesson's Recent Stock Decline

McKesson Corporation (MCK), a major pharmaceutical and medical supply distributor, experienced a significant drop in its share price. This decline, which saw shares plunge 9.9%—making it the biggest loss among S&P 500 stocks—is attributed to two key factors.

1. Lower-Than-Expected Profit Guidance

A primary driver for the stock drop was McKesson's issuance of profit guidance for the second quarter that fell below market expectations. When a company projects future earnings that are less than what analysts and investors anticipate, it often signals potential challenges or reduced profitability ahead. This can lead to a reassessment of the company's value by investors, prompting them to sell shares and thus pushing the stock price down.

2. Sale of Canadian Businesses

Another contributing factor is McKesson's agreement to sell its Canada-based businesses, specifically Rexall and Well.ca, to Birch Hill Equity Partners. While such divestitures can be part of a broader strategic realignment, they can also introduce uncertainty for investors. The immediate market reaction might be negative if:

• Investors perceive the sale as a loss of significant revenue streams.
• There's uncertainty about how the proceeds from the sale will be utilized.
• The market views the divested assets as integral to the company's growth strategy.

Summary of Factors Leading to McKesson's Drop

The combination of these two events created a negative sentiment among investors, leading to the substantial decline in McKesson's share price.