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Earnings Beat: Merck & Co., Inc. Just Beat Analyst Forecasts, And Analysts Have Been Updating Their Models

Simply Wall St
·4 min read

Merck & Co., Inc. (NYSE:MRK) just released its quarterly report and things are looking bullish. It was overall a positive result, with revenues beating expectations by 2.8% to hit US$13b. Merck reported statutory earnings per share (EPS) US$1.16, which was a notable 14% above what the analysts had forecast. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.

View our latest analysis for Merck

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earnings-and-revenue-growth

Taking into account the latest results, the consensus forecast from Merck's 18 analysts is for revenues of US$51.5b in 2021, which would reflect a meaningful 8.9% improvement in sales compared to the last 12 months. Statutory earnings per share are predicted to shoot up 23% to US$5.59. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$51.4b and earnings per share (EPS) of US$5.52 in 2021. So it's pretty clear that, although the analysts have updated their estimates, there's been no major change in expectations for the business following the latest results.

It will come as no surprise then, to learn that the consensus price target is largely unchanged at US$96.00. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. Currently, the most bullish analyst values Merck at US$107 per share, while the most bearish prices it at US$85.00. Even so, with a relatively close grouping of estimates, it looks like the analysts are quite confident in their valuations, suggesting Merck is an easy business to forecast or the the analysts are all using similar assumptions.

Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. It's clear from the latest estimates that Merck's rate of growth is expected to accelerate meaningfully, with the forecast 8.9% revenue growth noticeably faster than its historical growth of 4.3%p.a. over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 6.7% per year. Factoring in the forecast acceleration in revenue, it's pretty clear that Merck is expected to grow much faster than its industry.

The Bottom Line

The most important thing to take away is that there's been no major change in sentiment, with the analysts reconfirming that the business is performing in line with their previous earnings per share estimates. Fortunately, they also reconfirmed their revenue numbers, suggesting sales are tracking in line with expectations - and our data suggests that revenues are expected to grow faster than the wider industry. The consensus price target held steady at US$96.00, with the latest estimates not enough to have an impact on their price targets.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At Simply Wall St, we have a full range of analyst estimates for Merck going out to 2024, and you can see them free on our platform here..

That said, it's still necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with Merck , and understanding these should be part of your investment process.

This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.