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Sydnee Gatewood
Sydnee Gatewood
Articles (940) 

Merck Shares Rise on Strong Sales Growth

Drugmaker revises revenue, earnings guidance

Pharmaceutical giant Merck & Co. Inc. (NYSE:MRK) reported strong second-quarter earnings before the opening bell on Tuesday, sending shares up 3% in premarket trading.

The Kenilworth, New Jersey-based company, which is known for oncology drugs like Keytruda and the Gardasil vaccine, posted earnings of $1.30 per share, ahead of Refinitiv’s estimates of $1.16. Revenue grew 12% from the prior-year quarter to $11.76 billion, topping expectations of $10.96 billion.

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Merck said it was supported by strong sales of its Keytruda immunotherapy, which boosts the immune system in order to fight cancer. Sales of the drug increased 58% during the quarter to $2.6 billion. Gardasil, an HPV vaccine that prevents certain types of cancer, saw sales grow 45.7% to $886 million. Sales of vaccines for children, including the MMR vaccine for the prevention of measles, mumps and rubella, jumped 58% to $675 million.

By segment, the pharmaceutical business recorded a 13% increase in sales to $10.5 billion. In the animal health division, revenue grew 3% to $1.1 billion.

In a statement, Chairman and CEO Kenneth Frazier said Merck’s performance was driven by its “science-led strategy and execution” across its key growth areas.

“We remain confident that our innovative products and significant pipeline opportunities will continue to deliver strong results and provide sustainable value to patients and shareholders,” he added.

Merck also revised its guidance for the full year. As a result of charges related to the acquisition of biotech company Peloton Therapeutics, the company narrowed and lowered its GAAP earnings per share range for the year to between $3.78 and $3.88. It also narrowed and raised its adjusted earnings per share outlook to between $4.84 and $4.94. Analysts were anticipating $4.75 per share. Revenue is forecasted to range from $45.2 billion to $46.2 billion, above analysts’ projections of $44.74 billion.

With a market cap of $217.07 billion, shares of Merck were up 1.8% at $83.97 on Tuesday morning. After climbing 16% in 2018, GuruFocus estimates the stock has gained another 9% year to date.

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Gurus who are currently benefiting from Merck’s performance include the Vanguard Health Care Fund (Trades, Portfolio), Ken Fisher (Trades, Portfolio), Pioneer Investments (Trades, Portfolio), PRIMECAP Management (Trades, Portfolio), Jeremy Grantham (Trades, Portfolio), Richard Pzena (Trades, Portfolio) and many others.

According to the GuruFocus Industry Overview page, Merck is the third-largest company in the drug manufacturers sector, behind Johnson & Johnson (NYSE:JNJ) and Pfizer Inc. (NYSE:PFE). Other top players in the space include Amgen Inc. (NASDAQ:AMGN), Eli Lilly & Co. (NYSE:LLY), AbbVie Inc. (NYSE:ABBV), Gilead Sciences Inc. (NASDAQ:GILD), Bristol-Myers Squibb Co. (NYSE:BMY), Celgene Corp. (NASDAQ:CELG) and Zoetis Inc. (NYSE:ZTS).

Disclosure: No positions.

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About the author:

Sydnee Gatewood
I am the editorial director at GuruFocus. I have a BA in journalism and a MA in mass communications from Texas Tech University. I have lived in Texas most of my life, but also have roots in New Mexico and Colorado. Follow me on Twitter! @gurusydneerg

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