McKesson Corp. (NYSE:MCK)

The data indicates a consistent increase in operating profit over the six-year period, rising from 1,897 million US dollars in 2011 to 3,553 million US dollars in 2016. This reflects a strong positive trend in profitability for the segment.

Revenues have also shown a steady upward trajectory, starting at 108,889 million US dollars in 2011 and reaching 187,999 million US dollars by 2016. Notably, there is a significant jump in revenues between 2014 and 2015, with an increase of approximately 41,550 million US dollars, suggesting a possible expansion or acquisition during that period.

The segment profit margin, expressed as a percentage, remains relatively stable throughout the six years, fluctuating within a narrow range between 1.73% and 1.89%. It peaked in 2012 at 1.86%, dipped slightly in subsequent years, and then rose again to 1.89% in 2016. Despite the variations, the margin has not demonstrated significant volatility, indicating consistent operational efficiency relative to revenues.

Operating Profit

Exhibited continuous growth, nearly doubling from 2011 to 2016.

Revenues

Expanded steadily with a marked increase in 2015, suggesting business growth or strategic changes.

Segment Profit Margin

Maintained a stable trend, with minor fluctuations indicating steady profitability proportionate to revenues.

Overall, the segment shows strong financial performance with increasing absolute profits and revenues, accompanied by a stable profit margin, which collectively suggest effective management and scaling of operations over the reviewed period.

Revenues

Revenues experienced a downward trend over the analyzed six-year period, starting at $3,195 million in 2011 and gradually decreasing to $2,885 million by 2016. Notably, there was a slight increase in revenues from 2011 to 2013, peaking at $3,401 million, followed by a consistent decline each subsequent year.

Operating Profit

Operating profit showed an overall increasing trend from 2011 through 2016. It started at $301 million in 2011, briefly declined in 2013 to $297 million, and then steadily increased to reach $519 million by 2016. This indicates improved profitability despite the reduction in revenues.

Segment Profit Margin

The segment profit margin exhibited a notable upward trend, increasing from 9.42% in 2011 to 17.99% in 2016. There was slight fluctuation in the early years, with a dip to 8.73% in 2013, but the margin continuously improved from 2014 onwards, reflecting enhanced operational efficiency and profitability within the segment.

Overall Analysis

Despite declining revenues over the latter years, the segment succeeded in growing its operating profit and significantly improving its profit margin. This suggests that the segment may have optimized costs or shifted towards higher-margin products or services during this period. The contrasting trends between revenues and operating profit/margin highlight an emphasis on profitability rather than growth in sales volume.

Operating Profit

The operating profit exhibited a consistent upward trend over the six-year period. Starting at $1,897 million in 2011, the figure increased steadily each year, reaching $3,553 million by 2016. This signifies a substantial growth of approximately 87%, indicating enhanced profitability within the segment.

Segment Assets

Segment assets grew notably from $22,983 million in 2011 to $47,088 million in 2016. The most significant increase occurred between 2013 and 2014, when assets surged from $27,307 million to $42,758 million. Overall, assets more than doubled during the examined period, suggesting considerable expansion or investment in the segment’s asset base.

Segment Return on Assets (ROA)

The segment ROA presented a more volatile pattern compared to profit and assets. It started at 8.25% in 2011, showed a slight increase to 8.75% in 2012, followed by a decline to 8.05% in 2013. A more pronounced drop occurred in 2014 to 5.76%, coinciding with the substantial rise in assets. Thereafter, ROA improved moderately to 6.93% in 2015 and 7.55% in 2016. This suggests that while profitability increased, the efficiency of asset utilization experienced a temporary downturn during asset expansion but began recovering in the latter years.

Overall Insights

The data indicate robust growth in operating profit and assets over the analyzed timeframe, reflecting effective scaling within the segment. However, the fluctuating ROA reflects challenges in maintaining asset utilization efficiency amidst rapid asset growth. The improving ROA in the final years suggests a gradual adaptation to the expanded asset base, optimizing return generation.

Operating Profit

The operating profit displayed a generally upward trend over the six-year period. Beginning at 301 million US dollars in the fiscal year ending March 31, 2011, it increased steadily with a dip in 2013 to 297 million. After this decline, it rebounded significantly, reaching 519 million by the fiscal year ending March 31, 2016. This represents a substantial growth overall, indicating improving operational efficiency or higher revenues in the segment.

Segment Assets

Segment assets initially increased from 3,504 million US dollars in 2011 to a peak of 3,829 million in 2013. However, from 2014 onward, there was a consistent decline in assets, falling to 3,072 million by 2016. This downward trend following 2013 suggests a reduction in investment or divestiture of assets within the segment, potentially as a strategic realignment or efficiency measure.

Segment Return on Assets (ROA)

The segment's return on assets (ROA) exhibited marked improvement throughout the period. Starting at 8.59% in 2011, the ROA increased to 10.18% in 2012, dropped to 7.76% in 2013 coincident with the decrease in operating profit, then surged steadily to 16.89% by 2016. This trend reflects enhanced profitability relative to the asset base, particularly notable after 2013 when asset levels were decreasing but profit increased. The rising ROA indicates more effective utilization of assets to generate earnings.

The Distribution Solutions segment exhibits a generally positive revenue trend over the six-year period. Revenues increased from US$108,889 million in 2011 to US$187,999 million in 2016, representing substantial growth, particularly notable between 2014 and 2015. This increase was accompanied by a rise in segment assets, which grew from US$22,983 million in 2011 to US$47,088 million in 2016, indicating expansion of the asset base supporting segment operations.

The segment asset turnover ratio shows a more variable pattern. Starting at 4.74 in 2011, the ratio remained relatively stable through 2012 but declined consistently to 3.14 by 2014. This decrease suggests a temporary reduction in efficiency in how the assets were utilized to generate revenues during that period. However, turnover improved to 4.00 in 2015 and remained stable at 3.99 in 2016, indicating a recovery in asset use efficiency concurrent with the sharp revenue increases.

Revenues

Demonstrated sustained growth throughout the period, with a notable sharp rise between 2014 and 2015, suggesting successful market expansion or increased sales volume.

Segment assets

Almost doubled over the six years, showing significant investment or asset accumulation to support the segment's growth.

Segment asset turnover

Initially stable, then declined considerably by 2014, pointing to less efficient asset utilization during those years, followed by a recovery in 2015 and maintenance of efficiency in 2016 close to previous higher levels.

Overall, the data reflect a segment undergoing growth with periods of fluctuating operational efficiency. The asset base has expanded significantly, and recent improvements in asset turnover suggest that revenue growth was increasingly supported by more effective use of assets.)

Revenue Trends

Revenues for the segment showed a general downward trajectory over the six-year period. After increasing from 3,195 million USD in 2011 to a peak of 3,401 million USD in 2013, revenues declined each subsequent year to 2,885 million USD in 2016. This represents an overall decrease of approximately 9.8% from the peak to the latest year.

Segment Assets

Segment assets experienced some fluctuations but generally trended downward in the later years. Starting at 3,504 million USD in 2011, assets increased to a high of 3,829 million USD in 2013 before declining to 3,072 million USD by 2016, a reduction of nearly 20% from the highest point. This suggests a contraction or divestiture of assets within the segment over time.

Segment Asset Turnover

The asset turnover ratio, indicating efficiency in using assets to generate revenue, showed limited variability. It started at 0.91 in 2011, slightly increased in 2012 to 0.93, then dipped to 0.89 in 2013. From 2014 onwards, the ratio stabilized in a narrow range between 0.94 and 0.96. The stability in this metric near the 0.94 mark in later years suggests consistent operational efficiency despite declines in both revenues and assets.

Overall Insights

The segment experienced a peak in both revenue and assets around 2013, followed by a decline through 2016. Although total revenues and assets decreased, the asset turnover ratio remained relatively steady, indicating that the segment maintained its effectiveness in utilizing assets to generate revenues even during periods of contraction. The pattern suggests strategic adjustments possibly involving asset disposal or restructuring while preserving operational efficiency.

Expenditures for Long-Lived Assets

The expenditures for long-lived assets have generally increased over the analyzed period. Starting from US$162 million in 2011, the figure rose steadily to US$306 million by 2016. The most notable increments occurred between 2014 and 2015, where expenditures jumped from US$180 million to US$301 million, indicating a significant increase in investment for asset acquisition or improvement during this interval. The expenditure level remained relatively stable between 2015 and 2016.

Depreciation and Amortization

Depreciation and amortization expenses exhibited a pronounced upward trend from 2011 to 2015. Beginning at US$225 million in both 2011 and 2012, the amount increased to US$265 million in 2013, then surged sharply to US$448 million in 2014 and peaked at US$750 million in 2015. In 2016, there was a decline to US$669 million, though this value remained substantially higher than earlier years. This pattern suggests accelerated recognition of depreciation and amortization expenses, possibly reflecting larger asset bases or changes in asset valuation methods during this timeframe.

Segment Capital Expenditures to Depreciation Ratio

The ratio of capital expenditures to depreciation has shown a declining trend over the period under review. Beginning at 0.72 in 2011 and increasing slightly to 0.78 in 2012, it then decreased to 0.62 in 2013. A more pronounced drop occurred from 2013 to 2014, settling at 0.4 and maintaining this level in 2015 before a slight increase to 0.46 in 2016. This downward movement indicates that capital expenditures have not kept pace with the depreciation expense, suggesting a potential reduction in investment intensity relative to asset aging during the middle years, with a minor recovery towards the end of the period.

The data for the “Technology Solutions” segment reveals notable trends in capital expenditures, depreciation and amortization expenses, and their interrelation over the six-year period ending March 31, 2016.

Expenditures for Long-Lived Assets

The capital expenditures experienced fluctuation over the years. Beginning at US$26 million in 2011, there was a decline to US$22 million in 2012, followed by a significant increase to US$42 million in both 2013 and 2014. Subsequently, there was a sharp decline to US$27 million in 2015 and further down to US$15 million in 2016. Overall, the expenditures showed volatility, peaking mid-period before declining substantially in the final years.

Depreciation and Amortization

Depreciation and amortization expenses remained relatively stable between 2011 and 2013, ranging near US$206-209 million. However, a marked decrease occurred in 2014, dropping to US$136 million. Although a slight increase ensued in 2015 to US$156 million, expenses again declined to US$107 million by 2016. This pattern indicates a downward trend in depreciation and amortization starting mid-period, reflecting possible asset base changes or revaluation.

Segment Capital Expenditures to Depreciation Ratio

The ratio of capital expenditures to depreciation fluctuated, beginning low at 0.12 in 2011 and slightly decreasing to 0.11 in 2012. It then rose sharply to 0.20 in 2013 and peaked at 0.31 in 2014, coinciding with the temporary increase in capital expenditures and decrease in depreciation. Following this peak, the ratio tapered down to 0.17 in 2015 and 0.14 in 2016, aligning with the overall reductions in capital investments and depreciation expenses toward the end of the period.

In summary, the segment’s capital investment and depreciation patterns reveal a mid-period surge in spending and asset write-downs, succeeded by a contraction phase. The volatility in the ratio of capital expenditures to depreciation suggests variability in asset replacement or growth strategies during the period analyzed.