Why Invest In McKesson Corporation Stocks in 2012?

McKesson Corporation is the biggest and oldest healthcare service provider company in the United States conducting two distinct types of businesses in support of the healthcare industry. McKesson's core business activity revolves around pharmaceutical and medical supply distribution making them the biggest distributor on the North American market. The company supplies over 40,000 pharmaceutical outlets, hospitals and clinics throughout the United States and Canada.

Second in line is their technology solutions business delivering clinical systems, analytics, supply chain management, and connectivity solutions to pharmacies, hospitals and a variety of healthcare services providers. Although McKesson's distribution activity ($105 billion for 2010) makes up 96% of their revenue, the company's information technology business is no less significant at $3 billion all on its own, with McKesson software and hardware IT solutions utilized in 70% of U.S. hospitals with over 200 beds.

McKesson Corporation provides products and services in all areas of pharmacy and drug distribution, from physical distribution and supply chain services to a product line of proprietary generics and automated dispensing systems, outsourcing services, and record keeping systems employed in retail as well as hospital pharmacy operations.

The company acquired U.S. Oncology at $2.16 billion in 2010, thus engaging in distribution of products aimed at the cancer-care industry and becoming the nation's most important supplier of materials, technology, and operational platforms in oncology.

Ticker symbol: MCK (NYSE)
S&P rating: A -
Value Line financial strength rating: A+
Current yield: 0.9%

The greatest virtue of McKesson's business is probably the fact that it's as recession-proof as it gets. While sales decreased only very slightly in 2010 (to $108.7 billion), earnings went on upward at $4.60 per share, exceeding the previous year by 12.5%.

Obviously, McKesson benefited greatly from the H1N1 flu vaccination craze, so 2011 revenue comparisons are quite flat. Having made significant improvements in its operations and acquired U.S. Oncology, the management estimated earnings at $4.90 for 2011. The company increased its dividend 50% to $0.72 per share, and executed a $1 billion stock reacquisition both easily afforded.

McKesson's distribution business has proven unshakable. Favorable demographic figures and the rising number of people on the insured health-care rolls will surely increase demand in the niche dominated by the company.

As hospitals and clinics are encouraged to improve operational efficiency, McKesson is looking forward to capitalizing on its new technology solutions business sooner than expected, even though it only makes up 3% of all company activity and as such might be easy to overlook.

As in the case of most distributors, the company has to work with very thin margins, but the new information technology services business and generic equivalent drugs are a great step forward as well as the company's efforts to reduce its share count by continuing to buy back shares.