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Merck (MRK) Outpaces Stock Market Gains: What You Should Know

Zacks Equity Research
·3 mins read

Merck (MRK) closed at $82.95 in the latest trading session, marking a +1.28% move from the prior day. This change outpaced the S&P 500's 0.83% gain on the day. Elsewhere, the Dow gained 1.2%, while the tech-heavy Nasdaq added 0.74%.

Prior to today's trading, shares of the pharmaceutical company had lost 3% over the past month. This has lagged the Medical sector's loss of 1.64% and was narrower than the S&P 500's loss of 4.83% in that time.

Investors will be hoping for strength from MRK as it approaches its next earnings release, which is expected to be October 27, 2020. In that report, analysts expect MRK to post earnings of $1.45 per share. This would mark a year-over-year decline of 3.97%. Our most recent consensus estimate is calling for quarterly revenue of $12.01 billion, down 3.12% from the year-ago period.

Looking at the full year, our Zacks Consensus Estimates suggest analysts are expecting earnings of $5.69 per share and revenue of $47.79 billion. These totals would mark changes of +9.63% and +2.03%, respectively, from last year.

Any recent changes to analyst estimates for MRK should also be noted by investors. These revisions typically reflect the latest short-term business trends, which can change frequently. As such, positive estimate revisions reflect analyst optimism about the company's business and profitability.

Based on our research, we believe these estimate revisions are directly related to near-team stock moves. We developed the Zacks Rank to capitalize on this phenomenon. Our system takes these estimate changes into account and delivers a clear, actionable rating model.

Ranging from #1 (Strong Buy) to #5 (Strong Sell), the Zacks Rank system has a proven, outside-audited track record of outperformance, with #1 stocks returning an average of +25% annually since 1988. Over the past month, the Zacks Consensus EPS estimate has moved 0.01% lower. MRK currently has a Zacks Rank of #3 (Hold).

In terms of valuation, MRK is currently trading at a Forward P/E ratio of 14.38. This valuation marks a discount compared to its industry's average Forward P/E of 14.39.

It is also worth noting that MRK currently has a PEG ratio of 2.13. The PEG ratio is similar to the widely-used P/E ratio, but this metric also takes the company's expected earnings growth rate into account. The Large Cap Pharmaceuticals industry currently had an average PEG ratio of 2 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 122, which puts it in the top 49% 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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