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Should You Buy, Sell or Hold Merck (MRK) Ahead of Q2 Earnings?
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Merck (MRK - Free Report) will report its second-quarter earnings on Jul 30, before market open. The Zacks Consensus Estimate for sales and earnings is pegged at $15.85 billion and $2.15 per share, respectively. Earnings estimates for Merck have risen from $8.58 to $8.60 per share over the past seven days. For 2025, earnings estimates have risen from $9.94 to $9.96 per share over the same timeframe.
Image Source: Zacks Investment Research
Earnings Surprise History
The healthcare bellwether’s performance has been solid, with the company exceeding earnings expectations in each of the trailing four quarters. It delivered a four-quarter earnings surprise of 38.72%, on average. In the last reported quarter, the company delivered an earnings surprise of 6.70%, as seen in the chart below.
Per our proven model, companies with the combination of a positive Earnings ESP and a Zacks Rank #1, #2 (Buy) or #3 have a good chance of delivering an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Factors Shaping the Upcoming Results
Merck’s top-line growth in the second quarter is likely to have been driven by higher sales of blockbuster cancer drug Keytruda, like several previous quarters.
Keytruda sales are likely to have been driven by rapid uptake across earlier-stage indications globally, like triple-negative breast cancer and renal cell carcinoma, as well as early-stage non-small cell lung cancer, for which approval was received in the United States in October 2023. Continued strong momentum in metastatic indications is also likely to have boosted sales growth. The Zacks Consensus Estimate, as well as our estimate for Keytruda’s sales, is $7.11 billion.
Higher alliance revenues from Lynparza, driven by increased demand, may have boosted oncology sales. Please note that Merck markets Lynparza in partnership with AstraZeneca (AZN - Free Report) . Alliance revenues from Lenvima may have also boosted oncology sales.
Sales of Welireg are likely to have been driven by increased uptake in VHL-associated tumors and additional indications following the FDA approval for previously treated advanced renal cell carcinoma in December 2023.
With regard to the HPV vaccine, Gardasil, ex-U.S. sales are expected to have been hurt by unfavorable timing of shipments in China. In the United States, higher pricing is likely to have benefited sales.
The Zacks Consensus Estimate for Gardasil is $2.53 billion, while our estimate is $2.39 billion.
In the hospital specialty portfolio, increased demand in the United States is likely to have been offset by the impact of generic competition in Europe for neuromuscular blockade medicine — Bridion injection. The Zacks Consensus Estimate for Bridion is $448 million, while our estimate is $478.0 million.
Lower demand and pricing in the United States and generic competition in certain international markets, mainly Europe and Asia Pacific, are likely to have hurt sales of the diabetes franchise (Januvia/Janumet).
Investors will be keen to know the commercialization plans of the new pulmonary arterial hypertension (PAH) drug, Winrevair (sotatercept), which the FDA approved in March and Capvaxive, Merck’s 21-valent pneumococcal conjugate vaccine, which was approved in the United States in June 2024.
The Zacks Consensus Estimate for Merck’s Pharmaceutical unit is $14.16 billion, while our estimate is $14.04 billion.
The Animal Health franchise’s sales have been lukewarm for the past two quarters. It remains to be seen if the trend improved in the second quarter. The Zacks Consensus Estimate for the Animal Health unit is $1.52 billion, while our estimate is $1.51 billion.
Nonetheless, a single quarter’s results are not so important for long-term investors. Let us delve deeper to understand whether to buy, sell or hold Merck stock.
Price Performance & Valuation
Merck’s stock has risen 15.3% so far this year, underperforming an increase of 19.2% for the industry, as seen in the chart below.
Merck Stock Performance
Image Source: Zacks Investment Research
From a valuation standpoint, Merck appears attractive relative to the industry. Going by the price/earnings ratio, the company’s shares currently trade at 13.43 forward earnings, lower than 19.91 for the industry. The shares are also trading below their 5-year average mean of 13.83. Merck’s stock is also cheaper than other large drugmakers like Novo Nordisk and Eli Lilly.
MRK Stock Valuation
Image Source: Zacks Investment Research
Investment Thesis
Merck boasts more than six blockbuster drugs in its portfolio, with PD-L1 inhibitor Keytruda approved for several types of cancers and alone accounting for more than 45% of the company’s pharmaceutical sales. The drug has played an instrumental role in driving Merck’s steady revenue growth in the past few years. Though Keytruda will lose patent exclusivity in 2028, its sales are expected to remain strong until then.
Merck made meaningful regulatory and clinical progress this year across areas like oncology (mainly Keytruda), vaccines and infectious diseases while also executing strategic business moves like the acquisitions of Eyebiotech Limited, Harpoon Therapeutics and Elanco Animal Health Incorporated’s (ELAN - Free Report) aqua business. These pulled up the stock price.
Merck also has some key new products lined up for launch. Between 2025 and 2030, Merck expects eight potential new product approvals. We believe that among these, Capvaxive and Winrevair, both approved by the FDA in 2024, have the potential to generate significant revenues for Merck over the long term.
Merck does have its share of problems, like generic competition for several drugs and rising competitive pressure, mainly on the diabetes franchise. There are concerns about the firm’s ability to grow its non-oncology business ahead of Keytruda's loss of exclusivity later in the decade.
Nonetheless, we believe the strong demand for Keytruda and Gardasil vaccine for preventing HPV-related cancers, a significant contribution from new products like Welireg and Vaxneuvance vaccine and the Animal Health segment will keep driving top-line growth. Merck is pinning hopes on PAH drug Winrevair to boost its top line once Keytruda loses exclusivity.
Merck’s stock has shrugged off its 2023 underperformance by rising decently this year. The stock has been trading above its 200-day moving average since mid-December last year.
Conclusion
No matter how the second-quarter results play out, we suggest that investors who own Merck’s stock stay invested, as the company has one of the world’s best-selling drugs in its portfolio, generating billions of dollars in revenues. Though Keytruda may be Merck’s biggest strength and a solid reason to own the stock, it can also be argued that the company is excessively dependent on the drug and should look for ways to diversify its product lineup.
Consistently rising earnings estimates clearly highlight analysts’ optimistic outlook for further growth. Merck’s stock is reasonably valued and buying this fundamentally strong company at the current price can prove to be beneficial for long-term investors.
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Should You Buy, Sell or Hold Merck (MRK) Ahead of Q2 Earnings?
Merck (MRK - Free Report) will report its second-quarter earnings on Jul 30, before market open. The Zacks Consensus Estimate for sales and earnings is pegged at $15.85 billion and $2.15 per share, respectively. Earnings estimates for Merck have risen from $8.58 to $8.60 per share over the past seven days. For 2025, earnings estimates have risen from $9.94 to $9.96 per share over the same timeframe.
Earnings Surprise History
The healthcare bellwether’s performance has been solid, with the company exceeding earnings expectations in each of the trailing four quarters. It delivered a four-quarter earnings surprise of 38.72%, on average. In the last reported quarter, the company delivered an earnings surprise of 6.70%, as seen in the chart below.
What Does Our Model Say?
Merck has an Earnings ESP of +0.25% and a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Per our proven model, companies with the combination of a positive Earnings ESP and a Zacks Rank #1, #2 (Buy) or #3 have a good chance of delivering an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Factors Shaping the Upcoming Results
Merck’s top-line growth in the second quarter is likely to have been driven by higher sales of blockbuster cancer drug Keytruda, like several previous quarters.
Keytruda sales are likely to have been driven by rapid uptake across earlier-stage indications globally, like triple-negative breast cancer and renal cell carcinoma, as well as early-stage non-small cell lung cancer, for which approval was received in the United States in October 2023. Continued strong momentum in metastatic indications is also likely to have boosted sales growth. The Zacks Consensus Estimate, as well as our estimate for Keytruda’s sales, is $7.11 billion.
Higher alliance revenues from Lynparza, driven by increased demand, may have boosted oncology sales. Please note that Merck markets Lynparza in partnership with AstraZeneca (AZN - Free Report) . Alliance revenues from Lenvima may have also boosted oncology sales.
Sales of Welireg are likely to have been driven by increased uptake in VHL-associated tumors and additional indications following the FDA approval for previously treated advanced renal cell carcinoma in December 2023.
With regard to the HPV vaccine, Gardasil, ex-U.S. sales are expected to have been hurt by unfavorable timing of shipments in China. In the United States, higher pricing is likely to have benefited sales.
The Zacks Consensus Estimate for Gardasil is $2.53 billion, while our estimate is $2.39 billion.
In the hospital specialty portfolio, increased demand in the United States is likely to have been offset by the impact of generic competition in Europe for neuromuscular blockade medicine — Bridion injection. The Zacks Consensus Estimate for Bridion is $448 million, while our estimate is $478.0 million.
Lower demand and pricing in the United States and generic competition in certain international markets, mainly Europe and Asia Pacific, are likely to have hurt sales of the diabetes franchise (Januvia/Janumet).
Investors will be keen to know the commercialization plans of the new pulmonary arterial hypertension (PAH) drug, Winrevair (sotatercept), which the FDA approved in March and Capvaxive, Merck’s 21-valent pneumococcal conjugate vaccine, which was approved in the United States in June 2024.
The Zacks Consensus Estimate for Merck’s Pharmaceutical unit is $14.16 billion, while our estimate is $14.04 billion.
The Animal Health franchise’s sales have been lukewarm for the past two quarters. It remains to be seen if the trend improved in the second quarter. The Zacks Consensus Estimate for the Animal Health unit is $1.52 billion, while our estimate is $1.51 billion.
Nonetheless, a single quarter’s results are not so important for long-term investors. Let us delve deeper to understand whether to buy, sell or hold Merck stock.
Price Performance & Valuation
Merck’s stock has risen 15.3% so far this year, underperforming an increase of 19.2% for the industry, as seen in the chart below.
Merck Stock Performance
From a valuation standpoint, Merck appears attractive relative to the industry. Going by the price/earnings ratio, the company’s shares currently trade at 13.43 forward earnings, lower than 19.91 for the industry. The shares are also trading below their 5-year average mean of 13.83. Merck’s stock is also cheaper than other large drugmakers like Novo Nordisk and Eli Lilly.
MRK Stock Valuation
Investment Thesis
Merck boasts more than six blockbuster drugs in its portfolio, with PD-L1 inhibitor Keytruda approved for several types of cancers and alone accounting for more than 45% of the company’s pharmaceutical sales. The drug has played an instrumental role in driving Merck’s steady revenue growth in the past few years. Though Keytruda will lose patent exclusivity in 2028, its sales are expected to remain strong until then.
Merck made meaningful regulatory and clinical progress this year across areas like oncology (mainly Keytruda), vaccines and infectious diseases while also executing strategic business moves like the acquisitions of Eyebiotech Limited, Harpoon Therapeutics and Elanco Animal Health Incorporated’s (ELAN - Free Report) aqua business. These pulled up the stock price.
Merck also has some key new products lined up for launch. Between 2025 and 2030, Merck expects eight potential new product approvals. We believe that among these, Capvaxive and Winrevair, both approved by the FDA in 2024, have the potential to generate significant revenues for Merck over the long term.
Merck does have its share of problems, like generic competition for several drugs and rising competitive pressure, mainly on the diabetes franchise. There are concerns about the firm’s ability to grow its non-oncology business ahead of Keytruda's loss of exclusivity later in the decade.
Nonetheless, we believe the strong demand for Keytruda and Gardasil vaccine for preventing HPV-related cancers, a significant contribution from new products like Welireg and Vaxneuvance vaccine and the Animal Health segment will keep driving top-line growth. Merck is pinning hopes on PAH drug Winrevair to boost its top line once Keytruda loses exclusivity.
Merck’s stock has shrugged off its 2023 underperformance by rising decently this year. The stock has been trading above its 200-day moving average since mid-December last year.
Conclusion
No matter how the second-quarter results play out, we suggest that investors who own Merck’s stock stay invested, as the company has one of the world’s best-selling drugs in its portfolio, generating billions of dollars in revenues. Though Keytruda may be Merck’s biggest strength and a solid reason to own the stock, it can also be argued that the company is excessively dependent on the drug and should look for ways to diversify its product lineup.
Consistently rising earnings estimates clearly highlight analysts’ optimistic outlook for further growth. Merck’s stock is reasonably valued and buying this fundamentally strong company at the current price can prove to be beneficial for long-term investors.