McKesson (MCK) is likely to experience significant growth in pharmaceutical distribution, benefiting from healthy profit margins, a supportive regulatory climate, and clear growth prospects, Morgan Stanley said in a report Wednesday.

Morgan Stanley analysts described the present time as a "golden era" for drug distribution, marked by visible growth, consistent profitability, and regulatory stability.

The brokerage has selected McKesson as its "top pick," emphasizing its strong position in the US pharmaceutical sector, which may drive earnings per share beyond long-term targets. However, initial guidance might adopt a more cautious stance, the report said.

The core strength of the company's US Pharma segment is highlighted as the key driver for potential EPS growth exceeding long-term targets, effectively mitigating concerns regarding a weaker Med-Surg division, Morgan Stanley said.

Morgan Stanley has an overweight rating on McKesson, and raised its price target to $745 from $642, reflecting confidence in the company's continued growth and the overall positive outlook for the sector.

Shares of McKesson were up more than 2% in recent Wednesday trading.

Price: 688.58, Change: +14.89, Percent Change: +2.21