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Merck (MRK) Dips More Than Broader Markets: What You Should Know

Zacks Equity Research

In the latest trading session, Merck (MRK) closed at $83.63, marking a -0.87% move from the previous day. This change lagged the S&P 500's 0.84% loss on the day. Meanwhile, the Dow lost 0.53%, and the Nasdaq, a tech-heavy index, lost 1.47%.

Coming into today, shares of the pharmaceutical company had lost 1.77% in the past month. In that same time, the Medical sector gained 2.64%, while the S&P 500 gained 5.2%.

Investors will be hoping for strength from MRK as it approaches its next earnings release. The company is expected to report EPS of $1.25, up 5.04% from the prior-year quarter. Our most recent consensus estimate is calling for quarterly revenue of $11.73 billion, up 8.64% from the year-ago period.

Looking at the full year, our Zacks Consensus Estimates suggest analysts are expecting earnings of $4.92 per share and revenue of $46.09 billion. These totals would mark changes of +13.36% and +8.97%, respectively, from last year.

It is also important to note the recent changes to analyst estimates for MRK. These recent revisions tend to reflect the evolving nature of short-term business trends. As such, positive estimate revisions reflect analyst optimism about the company's business and profitability.

Our research shows that these estimate changes are directly correlated with near-term stock prices. To benefit from this, we have developed the Zacks Rank, a proprietary model which takes these estimate changes into account and provides an actionable rating system.

The Zacks Rank system, which ranges from #1 (Strong Buy) to #5 (Strong Sell), has an impressive outside-audited track record of outperformance, with #1 stocks generating an average annual return of +25% since 1988. The Zacks Consensus EPS estimate has moved 0.17% higher within the past month. MRK is currently a Zacks Rank #2 (Buy).

Digging into valuation, MRK currently has a Forward P/E ratio of 17.15. This valuation marks a premium compared to its industry's average Forward P/E of 14.26.

Meanwhile, MRK's PEG ratio is currently 1.71. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. MRK's industry had an average PEG ratio of 2.03 as of yesterday's close.

The Large Cap Pharmaceuticals industry is part of the Medical sector. This industry currently has a Zacks Industry Rank of 52, which puts it in the top 21% of all 250+ industries.

The Zacks Industry Rank gauges the strength of our industry groups by measuring the average Zacks Rank of the individual stocks within the groups. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.

You can find more information on all of these metrics, and much more, on Zacks.com.


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