Wall Street Analysts Think McKesson (MCK) Is a Good Investment: Is It?

Core Viewpoint - The article discusses the reliability of brokerage recommendations, particularly focusing on McKesson (MCK), and highlights the potential misalignment of interests between brokerage firms and retail investors [1][4]. Group 1: Brokerage Recommendations - McKesson has an average brokerage recommendation (ABR) of 1.38, indicating a consensus between Strong Buy and Buy, based on 16 brokerage firms [2]. - Out of the 16 recommendations, 13 are Strong Buy, accounting for 81.3% of all recommendations [2]. - Despite the positive ABR, relying solely on this information for investment decisions may not be advisable, as studies suggest brokerage recommendations often fail to guide investors effectively [4]. Group 2: Analyst Bias and Zacks Rank - Brokerage analysts tend to exhibit a strong positive bias in their ratings due to vested interests, with a ratio of five "Strong Buy" recommendations for every "Strong Sell" [5][9]. - The Zacks Rank, which is based on earnings estimate revisions, is presented as a more reliable indicator of near-term stock performance compared to ABR [7][10]. - The Zacks Rank is timely and reflects the latest earnings estimates, while ABR may not always be up-to-date [11]. Group 3: Current Earnings Estimates for McKesson - The Zacks Consensus Estimate for McKesson's earnings for the current year remains unchanged at $32.73, suggesting stable analyst views on the company's earnings prospects [12]. - The recent change in consensus estimates, along with other factors, has resulted in a Zacks Rank of 3 (Hold) for McKesson, indicating a cautious approach despite the positive ABR [13].