One key stock you need to track ahead of COVID-19 vaccine approvals

It’s been a spectacular year for many biotech and pharma investors who have made a killing out of the COVID-19 vaccine rally. Vaccine research specialists including Moderna (NASDAQ: MRNA), Novavax (NASDAQ: NVAX), and Inovio Pharmaceuticals (NASDAQ: INO) have already seen gravity-defying stock movements this year. With Pfizer (NYSE: PFE) vaccine already approved in the UK and more approvals around the corner, it’s time investors look outside the biotech space for a pandemic-driven rally.

And that’s where McKesson Corporation (NYSE: MCK) comes into play. The company is the country’s largest distributor of pharmaceuticals and medical supplies through its extensive global network and using technology such as radio-frequency identification (RFID) tags and pharmacy robotics. The company also has a chain of independently-owned pharmacies under its network.

Why is this stock important?

Being assigned the centralized distributor for vaccine distribution by the government, McKesson will be responsible for the logistics and delivery of various vaccines to the administration centers in a timely and secured manner.

This is a huge responsibility and comes with its own set of risks and challenges. However, it may be noted that this is not the first time McKesson is handling such a task. The Irving, Texas-based company had delivered around 126 million doses of vaccine in 2010, during the H1N1 crisis.    

CFO Britt Vitalone had recently disclosed that the government would ultimately hold control over the distribution program, and there could be other players as well. He added that the operational approach would resemble what was seen a decade back with H1N1, though he declined from getting into more details.

Raised outlook

The management is pretty optimistic about the impact of vaccine distribution on the firm’s financials. When it reported the second-quarter earnings results last month, McKesson raised its outlook on the adjusted EPS for the fiscal year to $16.00 – $16.50, from the prior range of $14.70 – $15.50.

The company expects around 15-20 cents of this coming from the kitting and storage of ancillary supplies for the future COVID-19 vaccines.

Stock rally

The stock has gained 30% since the beginning of this year. Interestingly, much of this growth occurred by the end of October, when positive reports on the efficacy of various vaccines emerged.

And yet, the street continues to be bullish on the stock. The average 12-month price target on MCK is approximately 11% above the trading price on Friday.

Finally, the fact that McKesson has a decent history of paying dividends to its shareholders is another reason to keep it at least on the watchlist. The current dividend yield stands at 0.94% and the firm has raised its payout by around 13% annually over the past decade.

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