CORPORATESISSUER COMMENT 22 OCTOBER 2015MCKESSON CORPORATION (MCK)Moodys Senior Unsecured Rating Baa2Moodys Outlook STABond-Implied Rating Baa1CDS-Implied Rating Aa3EDF-Implied Rating Baa1As of 10/21/2015ANALYST CONTACTSAllerton G. Smith 212-553-4058 Sr Dir-Sr Research Analyst allerton.smith@moodys.comABOUT CAPITAL MARKETS RESEARCHAnalyses from Moodys Capital Markets Research, Inc. (CMR) focus on explaining signals from the credit and equity markets. The publications address whether market signals, in the opinion of the groups analysts, accurately reflect the risks and investment opportunities associated with issuers and sectors. CMR research thus complements the fundamentally-oriented research offered by Moodys Investors Service (MIS), the rating agency.CMR is part of Moodys Analytics, which is one of the two operating businesses of Moodys Corporation. Moodys Analytics (including CMR) is legally and organizationally separated from Moodys Investors Service and operates on an arms length basis from the ratings business. CMR does not provide investment advisory services or products.View the CMR FAQ Contact the CMR team Follow us on TwitterMoodys Analytics markets and distributes all Moodys Capital Markets Research, Inc. materials. Moodys Capital Markets Research, Inc. is a subsidiary of Moodys Corporation. Moodys Analytics does not provide investment advisory services or products. For further detail, please see the last page.Market Signals ReviewMcKesson Corporation: Two Market-Implied Ratings Move Lower The CDS- and EDF'-implied ratings for McKesson both weakened over the last 12 months (Figure 1). The bond-implied rating matches its level of one year ago.Since October 21, 2014 when its CDS-implied rating was Aa2, McKessons CDS-implied rating has fallen from a peak of Aaa to Aa3. From A3 a year ago, the companys EDF-implied rating plateaued at A1 on multiple dates and sank to a low point of Baa2 for a single day (September 9), before landing at its current Baa1. The bond-implied rating was Baa1 12 months ago, identical to the present level. Over the period it ranged from A3 to Baa2.FIGURE 1. MCKESSON: MOODYS AND MARKET-IMPLIED RATINGS, LAST 365 DAYS (WEEKLY DATA)MOODY'S ANALYTICS CORPORATES2 22 OCTOBER 2015 MARKET SIGNALS REVIEW: MCKESSON CORPORATION: TWO MARKET-IMPLIED RATINGS MOVE LOWERAccording to our ratings gap-conditioned transition matrices, companies rated Baa2 with a bond-implied rating of Baa1 outperformed the broad market 29% of the time over the following 12 months, matched the markets performance 14% of the time, and underperformed the broad market 57% of the time.Readers will recall that when a market-implied rating falls the underlying securities have underperformed the broad market. 1McKessons CDS- and EDF-implied ratings gaps both worsened from a year ago (Figure 2). The CDS-implied ratings gap is +5 notches, down from +6 notches a year ago and +8 notches at its apex over ...
