Merck Q2 Earnings and Revenue Miss Estimates

Merck (MRK) delivered second-quarter financial results that fell short of Wall Street expectations, despite reflecting year-over-year growth. Worldwide sales from continuing operations were up 22% to $11.4 billion, but fell short of analysts’ estimate of $11.7 billion.

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Revenues included a 23% increase in KEYTRUDA sales that totaled $4.2 billion and an 88% increase for GARDASIL/GARDASIL 9 that totaled $1.2 billion. Animal health sales were up 34% to $1.5 billion. Merck Q2 earnings per share also missed expectations, coming in at $1.31, against the expected $1.48 a share.

Amid the earnings miss, CEO Rob Davis remained optimistic about the company delivering long-term growth. (See Merck stock charts on TipRanks)

“We are confident that we will deliver sustained long-term growth and value creation, enabled by our strengthening discovery research engine and by working with increased speed,” said Mr. Davis.

Merck is projecting sales growth of between 12% and 14% for the full year, translating to a narrow range of between $46.4 billion and $47.4 billion. The company expects Non-GAAP EPS to range between $5.47 and $5.57.

During the quarter, the company achieved significant milestones. Key among them were enhancing its product pipeline and securing multiple regulatory approvals. It also completed the divestment of Organon and received $9 billion in cash distribution.

Yesterday, Mizuho Securities analyst Mara Goldstein affirmed a Buy rating on the stock with a $100 price target, implying 30.1% upside potential to current levels. According to the analyst, Q2 earnings reflect an ongoing recovery from the COVID-19 pandemic, with KEYTRUDA, GARDASIL, and BRIDION delivering strong growth.

Goldstein stated, “EPS came in lighter than our forecast largely due to higher expenses. MRK narrowed the top-line guidance to $46.4-$47.4 by raising the bottom end of the range.”

MRK scores 4 out of 10 on TipRanks’ Smart Score rating system, suggesting that the stock is likely to perform in line with market averages.

Consensus among analysts is a Moderate Buy based on 5 Buys and 3 Holds. The average Merck price target of $93.57 implies 21.7% upside potential to current levels.