Merck Faces Challenges Amid Mixed Earnings Report

Merck's fourth-quarter earnings report shows 7% revenue growth and EPS of $1.72. However, disappointing Chinese sales and soft guidance raise concerns. Investors are advised to watch key products while interpreting current price downturns as possible buying opportunities.

Date: 22-02-2025

AI Rating: 5

Merck's Overall Performance
Merck's fourth-quarter performance has revealed mixed signals for investors. Despite exceeding expectations with a 7% revenue growth and an EPS of $1.72, the company faces challenges, particularly in the Chinese market and from its second-best product, Gardasil.

Earnings Per Share (EPS)
Merck reported an EPS of $1.72 for the fourth quarter and is guiding for a strong anticipated range of $8.88 to $9.03 for full-year 2025, indicating a growth of 16.1% to 18% compared to 2024. This forecast reflects improving profit margins, offsetting some concerns related to revenue stagnation and underwhelming sales of Gardasil.

Revenue Growth and Projections
Merck demonstrated 7% revenue growth in the previous quarter but anticipates a muted sales forecast for 2025, projecting between $64.1 billion and $65.6 billion. This range indicates a potential decline of up to 2.2% compared to 2024 sales.

Impact of Key Products
Keytruda remains vital, contributing a significant portion of revenue, with 19% growth year-over-year expected in 2024. Conversely, Gardasil's revenue experienced a 3% drop in 2024 and a dramatic 17% decline in Q4. The challenges posed by sales in China negatively impact guidance and expectations, leading to Merck withdrawing ambitious sales goals for Gardasil.

Investment Outlook
Despite these challenges, Merck's diversified portfolio, potential blockbuster drugs, and a historically strong performance may offer recovery potential. Investors should consider these factors when evaluating Merck shares, particularly in light of its current attractive valuation and dividend yield.

Stocks: MRK