Merck (MRK) to Report Q4 Earnings: What's in the Cards?
Merck MRK will report fourth-quarter and full-year 2022 results on Feb 2, before market open. In the last reported quarter, the company delivered an earnings surprise of 10.78%.
This large drugmaker’s performance beat earnings expectations in each of the trailing four quarters. The company delivered a four-quarter earnings surprise of 16.07%, on average.
Merck & Co., Inc. Price and EPS Surprise
Merck & Co., Inc. price-eps-surprise | Merck & Co., Inc. Quote
Merck’s stock has risen 29.3% in the past year compared with an increase of 9.7% for the industry.
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Factors to Consider
Strong global underlying demand across its business, particularly for cancer drug Keytruda and HPV vaccine, Gardasil, is likely to have boosted sales growth in the fourth quarter like several previous quarters.
In oncology drugs, Keytruda sales are likely to have been driven by continued strong momentum in metastatic indications and rapid uptake across recent earlier-stage launches. The Zacks Consensus Estimate for Keytruda’s sales is $5.57 billion, while our estimate is $5.62 billion. Higher alliance revenues from Lynparza, driven by continued uptake across multiple approved indications globally, may have boosted oncology sales. Please note that Merck markets Lynparza in partnership with AstraZeneca AZN.
AstraZeneca and Merck formed a profit-sharing deal to co-market Lynparza and Koselugo in July 2017.
AstraZeneca and Merck’s Lynparza is approved for four cancer types, ovarian, breast, prostate and pancreatic. Lynparza is also being evaluated in an earlier-line setting for the approved cancer indications
Alliance revenues from Lenvima may have also boosted oncology sales.
In the hospital specialty portfolio, higher demand due to recovery in surgical procedures and an increase in market share may have benefited sales of neuromuscular blockade medicine — Bridion injection. The Zacks Consensus Estimate for Bridion is $452 million, while our estimate is $436.5 million.
Merck and partner Ridgeback Biotherapeutics’ oral antiviral pill to treat COVID-19, Lagevrio (molnupiravir) is not likely to have been a major contributor of top-line growth in the fourth quarter like all three quarters of the year. Lagevrio sales should primarily consist of sales from international markets. Merck’s initial supply commitment of Lagevrio to the United States was fulfilled in the first quarter of 2022. Therefore, Lagevrio is unlikely to have recorded any sales in the United States in the fourth quarter. The Zacks Consensus Estimate for Lagevrio is $395 million while our estimate is $440 million.
With regard to the HPV vaccine, Gardasil, ex-U.S. sales are expected to have been driven by strong demand in China and increased supply in the fourth quarter. The favorable timing of CDC purchasing, which benefited U.S. sales in the third quarter, is likely to have reversed in the fourth quarter. The Zacks Consensus Estimate for Gardasil is $1.5 billion, while our estimate is $1.45 billion.
Meanwhile, the top line is expected to have witnessed the impact of the loss of U.S. market exclusivity for drugs like Remicade, Noxafil and Zetia. Continued pricing pressure and possible generic competition in international markets like China and Europe may have hurt sales of the diabetes franchise (Januvia/Janumet).
The Animal Health franchise’s sales growth was hurt by currency headwinds in the third quarter. It remains to be seen if the trend improved in the fourth quarter. The Zacks Consensus Estimate for the Animal Health unit is $1.27 billion, while our estimate is $1.20 billion.
Our proven model does not conclusively predict an earnings beat for Merck time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that is not the case here.
Earnings ESP: Merck’s Earnings ESP is +0.19%. The Zacks Consensus Estimate is $1.56 per share. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Merck has a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.
Other Stocks to Consider
Here are some biotech stocks that also have the right combination of elements to beat on earnings this time around:
Sanofi SNY has an Earnings ESP of +2.49% and a Zacks Rank #2.
Sanofi’s stock has declined 6.7% in the past year. Sanofi beat earnings estimates in all the last four quarters. SNY has a four-quarter average earnings surprise of 9.50%, on average. SNY is scheduled to release its fourth-quarter results on Feb 3.
Novo Nordisk NVO has an Earnings ESP of +12.81% and a Zacks Rank #2.
Novo Nordisk’s stock has risen 38.3% in the past year. Novo Nordisk topped earnings estimates in three of the last four quarters and has a four-quarter earnings surprise of 3.09%, on average. NVO is scheduled to release its fourth-quarter results on Feb 1.
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