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Buy Merck & Co (MRK) Stock Ahead of Q2 Earnings Report?

Christopher Vargas

Merck & Co MRK is set to report its fiscal 2019 second quarter earnings before the opening bell on July 30th. The large cap pharmaceutical company has been able to outpace its peers, gaining 7.6% year-to-date. While the broader drug and pharmaceutical market has struggled to stay in the green this year, MRK has been able to provide returns for its shareholders. MRK is a leading biopharmaceutical company known as MSD outside of the United States and Canada. The company prides itself on its ability to deliver innovative health solutions to consumers. Let’s take a further look into the company and what to expect from them this earnings season.

Company Overview and Q1 Performance

Merck is based in Kenilworth, NJ, and is a global research driven pharmaceutical products company. Back in 2009, the company acquired Schering-Plough for $41.1 billion. Furthermore, Merck sold off its Consumer Care business in October 2014 to German pharmaceutical Bayer. In January 2015, the company acquired Cubist Pharmaceuticals and added four marketed products, including Cubicin and Zerbaxa, to its hospital acute care portfolio. MRK has demonstrated their commitment to increasing access to healthcare through far-reaching policies, programs, and partnerships. Merck tries to keep itself at the forefront of research to advance prevention and treatments of diseases. Some of the diseases Merck manufactures drugs to treat are cancer, HIV, Ebola, and Alzheimer’s.

In Q1 2019, Merck was able to bring in $10.8 billion in revenue and report earnings of $1.22, which beat our estimates by 16.2% and 4.8%, respectively. The company was able to increase its net income by a whopping 286.2% with profits of $2.86 billion. Merck’s oncology pharmaceutical sector leads the pack with $2.54 billion in revenue for a 56.5% year over year increase. Vaccines brought in $1.78 billion and its hospital acute care portfolio attributed $725 million for a 21.6% jump and 8.46% fall, respectively.

Q2 Outlook

Our Consensus Estimates are currently calling for the pharmaceutical company’s top-line to make a jump of 4.29% with $10.91 billion in revenue. Earnings are expected to jump 9.43% to $1.16 per share. Merck has made a habit out of beating our Consensus Estimates, consecutively surpassing our estimates the past four quarters for an average EPS surprise of 5.67%. The pharmaceutical giant’s earnings revisions have ticked in the right direction as the four revisions have unanimously projected earnings to be higher.

Merck’s new products like Keytruda, Lynparza, and Bridion are contributing significantly to the company’s top line. Keytruda sales are gaining momentum with approval for additional indications, especially in the first-line lung cancer setting. Animal health and vaccines are also performing well and remain core components to future growth. Merck is currently a Zacks Rank #2 (Buy) and has a Style Score of B in Growth. Looking past Q2 to fiscal 2019 as a whole, Consensus Estimates are projecting for the company to see a 9.22% bottom line jump and predict revenue to reach $44.63 billion for a year over year increase of 5.51%. In addition, MRK has been able to outperform some of its industry peers such as Bayer BAYRY, Sanofi SNY, and AbbVie ABBV.

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