McKesson Corp. (NYSE:MCK)

The financial data reveals several noteworthy trends over the analyzed periods, focusing on profitability and expense management as a percentage of revenues.

Gross Profit

Gross profit percentage relative to revenues fluctuates moderately but generally exhibits a slight upward trend from approximately 5.07% in mid-2010 to a peak near 6.66% in early 2014 before declining somewhat toward late 2016, ending near 5.52%. This pattern indicates improved gross margin efficiency up to 2014, followed by some margin compression in subsequent periods.

Cost of Sales

Costs of sales consistently represent a significant majority of revenues, ranging roughly between 93.3% and 95%. The decrease in cost of sales percentage from around 94.93% in June 2010 to about 93.34% in early 2014 corresponds inversely to the gross profit improvements. Post-2014, a minor increase in cost of sales percentage is observed, aligning with the erosion in gross profit margin.

Operating Expenses

Operating expenses as a percentage of revenues fluctuate between approximately 3.3% and 5.2%, with an observable increase to above 5% in early 2014, peaking at 5.2%. Thereafter, operating expenses fluctuate but remain elevated relative to early years, contributing to pressures on operating income margins.

Operating Income

Operating income margins present volatility across periods yet maintain a positive stance, ranging from near 1.09% to a maximum of around 2.23%. Peaks in operating income percentage tend to coincide with periods where gross profit margins increase and operating expenses are controlled at lower levels. Declines in operating income after 2014 correspond with increased operating expenses and lower gross profit percentages.

Other Income and Expenses

Other income (loss), net remains minimal but consistently positive, around 0.01% to 0.07%, indicating a small but steady contribution. Interest expense relative to revenues remains fairly steady between -0.16% and -0.30%, showing stable financing costs throughout the periods.

Income Before Taxes and Income Tax Expense

Income from continuing operations before income taxes generally follows operating income trends but shows increased fluctuation with values between 0.92% and 2.07%. Income tax expense as a percentage of revenues ranges from -0.27% to -0.73%, with some variability that likely reflects changing tax rates or impacts of non-operating items.

Net Income

Net income attributable to the corporation displays volatility, ranging from a low near 0.19% to highs above 1.3%. The periods around early 2014 and post-2014 show a downturn in net income margin, suggesting challenges in profitability despite relatively stable revenues. The dips in net income are partly influenced by impairment charges and losses from discontinued operations, noted specifically in a goodwill impairment charge in late 2016 and impairment of an equity investment in late 2012.

Impairment and Nonrecurring Items

There are sporadic occurrences of nonrecurring charges such as goodwill impairment (-0.58% in late 2016), impairment of equity investment (-0.62% in late 2012), and gains on business combination (+0.26% in late 2011). These items cause visible distortions in operating results and contribute to quarter-to-quarter volatility in profitability metrics.

Overall, the company demonstrates a stable revenue base with gross profit margins improving until early 2014. Thereafter, both gross margins and operating income margins experience some compression, influenced by rising operating expenses and nonrecurring impairments. Net income reflects these fluctuations, accentuated by periodic charges and income tax variability. Maintaining control over operating expenses and limiting impairment losses appear critical to sustaining profitability.