Merck (MRK) reported robust Q2 results on Tuesday. The pharmaceutical giant swung to a profit in the second quarter and reported adjusted earnings of $2.28 per share, which beat analysts’ consensus estimate of $2.16 per share.
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MRK’s Q2 Revenue Breakdown
Sales increased by 7% year-over-year, with revenue hitting $16.1 billion. This beat analysts’ expectations of $15.87 billion. The rise in MRK’s revenues was driven by its Pharmaceutical business segment, which continued to shine in the second quarter. The Pharmaceutical business reported $14.4 billion in Q2 revenue, up 7% year-over-year, and comprised more than 85% of its total revenues for the second quarter.
MRK’s key oncology drug, Keytruda, brought in $7.27 billion in the second quarter, exceeding expectations. Meanwhile, Gardasil sales were nearly flat at $2.48 billion, impacted by lower sales in China despite higher U.S. prices.
Merck’s Strengthening Drug Pipeline
Merck is preparing for the loss of the Keytruda patent in 2028 with new deals and drug launches. The loss of this patent will likely result in the introduction of cheaper versions of the drug, leading to a decline in the company’s revenues.
The company’s Winrevair drug, approved earlier this year for a serious lung condition, could hit $5 billion in global sales by 2030. Another Merck drug, Capvaxive, a new vaccine against pneumococcus, was approved last month.
MRK’s FY24 Outlook
Looking forward, management raised its revenue outlook and now expects FY24 sales to be between $63.4 billion and $64.4 billion, compared to its prior forecast of $63.1 billion to $64.3 billion. However, the company trimmed its earnings guidance and has now projected earnings in the range of $7.94 to $8.04 per share, compared to its previous outlook of $8.53 to $8.65 per share. This earnings outlook includes one-time charges of $0.77 per share for the acquisitions of EyeBio and Harpoon Therapeutics.
For reference, analysts were expecting FY24 earnings of $8.45 per share on revenues of $64.3 billion.
Is Merck Stock a Buy or Sell?
Analysts remain bullish about MRK stock, with a Strong Buy consensus rating based on 13 Buys and two Holds. Over the past year, MRK has increased by more than 20%, and the average MRK price target of $146.89 implies an upside potential of 14.9% from current levels. These analyst ratings are likely to change following MRK’s results today.
