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Omar Venerio
Omar Venerio
Articles (1677) 

Wall Street Turns Red on Tuesday

Merck shares fall despite recording revenue growth

U.S. stocks were in the red on Tuesday, with tech stocks leading the decline. The Dow Jones Industrial Average fell 0.13% to 24,103, the S&P 500 Index declined 0.44% to 2,865 and the Nasdaq Composite Index dipped 1.34% to 8,613.

Non-index stocks have also posted gains and losses recentlyShares of Merck & Co. Inc. (NYSE:MRKfell more than 2% on Tuesday after the company announced first-quarter results. It posted earnings of $1.50 per sharebeating estimates by 16 cents. Revenue of $12.06 billion grew 11.5% from a year ago and beat analysts' expectations by $600 million.

“In this challenging and unprecedented time, the quality of our first-quarter performance reflects strong demand for our portfolio of innovative products, continued commercial and clinical execution and the dedication and resilience of our employees around the world. The fundamentals of our business remain strong,” Chairman and CEO Kenneth C. Frazier said.

During the quarter, pharmaceutical sales rose 10% to $10.7 billion. Without foreign exchange effects, it grew 12%. The increase was due to the growth in oncology and vaccines.

Growth in oncology was driven by higher sales of Keytruda, which increased 45% to $3.3 billion for the quarter. Growth in vaccines was fueled by higher sales of Gardasil and Pneumovax 23 (a pneumococcal vaccine polyvalent), a vaccine to combat pneumococcal disease, which had a higher demand from the U.S. and Europe due to the Covid-19 pandemic.

In the Animal Health segment, sales reached $1.2 billion, up 18% compared with the first quarter of 2019, principally due to the growth in companion animal products by higher demand for the Bravecto line of products for parasite control.

Moreover, the gross margin of 72.5% was up from 71.8% in the first quarter of 2019 due to favorable product mix and lower acquisition- and divestiture-related costs. The non-GAAP gross margin was 75.5%, down slightly from 75.9% in the previous year due to unfavorable effects of royalties and foreign exchange rates.

Looking ahead to full-year 2020, the company lowered its revenue range to between $46.1 billion and $48.1 billion. Also, it expects GAAP earnings per share in the range of $4.12 to $4.32, and non-GAAP earnings to be between $5.17 and $5.37.

The Vanguard Health Care Fund (Trades, Portfolio) trimmed its stake by 13.5% to 10,577,049 shares and Ken Fisher (Trades, Portfolio) reduced his holding by 1% to 8,890,000 shares. Ray Dalio sold out of the stock, while Philippe Laffont initiated a new position with 11,019 shares.

Gainers

Losers

  • United Parcel Service Inc. (NYSE:UPS) -6%
  • Motorola Solutions Inc. (NYSE:MSI) -5.8%
  • Waters Corp​. (NYSE:WAT) -5.6%
  • National Oilwell Varco Inc. (NOV) -4.8%
  • PPG Industries Inc. (NYSE:PPG) -4.6%
  • Centene Corp. (NYSE:CNC) -4.9%

Global markets

The main European stock markets traded in the green.The U.K.'s FTSE 100 gained 1.91%, France's CAC 40 rose 1.43%, Germany's Dax advanced 1.27% and Spain's Ibex 35 climbed 1.55%.

In Asia, Japan's Nikkei 225 fell 0.06%, India’s BSE Sensex rose 1.17%, Hong Kong's Hang Seng advanced 1.22% and China's Shanghai Composite slid 0.19%.

Disclosure: The author holds no positions in any stocks mentioned.

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About the author:

Omar Venerio
Omar Venerio is a capital markets, derivatives, corporate finance and financial management professor and Area Head of Finance. He is passionate about the stock market and providing independent fundamental research and hedge fund and insider trading-focused investigation.

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