Second quarter sales exceeded Wall Street expectations, while earnings per share were in line with estimates as the pharmaceutical giant saw demand for its blockbuster drugs continue to grow at a rapid pace and was forced to lower its revenue forecast for the year. increase throughout the year.
While analysts noted the group’s strong performance, shares in Merck fell 1.4% during early trading in New York.
The back story. Its roots go back to 1668, when the German
was founded as a pharmacy in the city of Darmstadt, today’s
Merck & Co.
was founded as an American branch in 1891.
The company makes drugs for the cancer treatment Keytruda and the HPV vaccine Gardasil. Last month, Merck spawned a group of non-core businesses — patented drugs sold abroad, biosimilars and a women’s health division — as
When it last reported revenues that fell short of analyst estimates, Merck noted strong growth in Keytruda’s sales, while revenues from its vaccines, including Gardasil, fell short of expectations. The wider drug industry has felt the effects of the Covid-19 pandemic as health concerns dominated by the coronavirus and social distancing measures have slowed down regular vaccination schedules.
In late June, Merck CEO Rob Davis took over the reins from high-profile leader Kenneth Frazier, who spent ten years at the top of the company.
Also read: Merck announces new CEO, but reports profit miss winst
What’s new. Merck reported second-quarter revenue of $11.4 billion, better than Wall Street’s estimates of nearly $11 billion and up 22% from the same period the year before. Adjusted EPS of $1.31 was in line with expectations, while adjusted net income of $3.3 billion (28% growth as of Q2 2020) just fell short of Street’s consensus.
Growth in the oncology division was led by higher sales of Keytruda, which rose 23% to $4.2 billion, while Gardasil fueled growth in vaccines as sales of the drug rebounded to $1.2 billion from lows. in the previous year, amid a wider immunization decline.
“We are encouraged by the strong momentum of our underlying businesses, led by our key growth engines, as the impact of the pandemic on our performance diminishes,” Davis said in a statement.
The company said it expects full-year revenue growth to be between 12% and 14%, while lowering and raising its 2021 revenue estimates to between $46.4 and $47.4 billion.
Plus: This former Merck company could have great potential
Looking forward. Markets seem finicky this earnings season: Even as companies in various sectors make huge gains, investors are finding negatives to seize and focus on. Despite strong results, Merck may have fallen victim to this sentiment.
But there is reason to be optimistic about the stock.
Analysts at Cantor Fitzgerald give Merck stock an overweight rating with a price target of $107. Traded around $77.50 Thursday, suggesting the stock has legs to climb 38% higher — not a bad estimate for a Dow’s return -industrial component.
“Underlying sales growth for Merck’s key products underscores that growth in oncology, vaccines, animal health and select hospital/specialty care products, as well as margin expansion opportunities, remain undervalued,” analysts led by Louise Chen wrote. The analysts added that they are seeing an increase in sales estimates for Keytruda in particular.
Write to Jack Denton at email@example.com