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Few areas of the economy are considered recession-proof. The wider healthcare field is part of that select group of sectors prepared to stay above any larger pullback in consumer spending and thrive even during a slowing U.S. economy.
Merck & Co. (MRK - Free Report) is a $240 billion market cap pharmaceutical titan that’s climbed over 20% in 2022. The firm is continuing to make acquisitions and many of Merck’s fundamentals make it an attractive play for the second half of 2022 and for years to come.
Oncology, Vaccines & Beyond
Merck is a diversified pharmaceutical company with offerings in areas such as oncology, vaccines, infectious diseases, diabetes, and beyond. One of its oncology stars is cancer-fighting drug Keytruda. Its first quarter sales climbed 23% to account for around 30% of total Q1 revenue.
Keytruda is an immunotherapy prescription medicine used to treat melanoma, non–small cell lung cancer, classical Hodgkin lymphoma (cHL), and more. Meanwhile, its HPV vaccinations Gardasil and Gardasil 9 soared 59%. Merck’s animal health segment climbed 4% overall.
Merck’s Covid-19 antiviral pill known as Lagevrio (molnupiravir) continued to shine as it competes against a similar offering from Pfizer. Both drugs aim to help treat Covid-19 and prevent hospitalizations. Merck’s offering has brought in tons of sales so far, with first quarter revenue coming at $3.25 billion, putting it behind only Keytruda in terms of total revenue.
Merck also bolstered its long-term portfolio last November when it bought Acceleron Pharma for roughly $11.5 billion. One of Acceleron’s prized offerings is an experimental drug for pulmonary arterial hypertension, which is a progressive and life-threatening blood vessel disorder. And it doesn’t appear that Merk will stop there, with the Wall Street Journal reporting recently that it’s in advanced talks to buy cancer-focused biotech company Seagen.
Image Source: Zacks Investment Research
Recent Growth and Outlook
Merck’s revenue climbed 6% in 2020 and 17% in 2021. Current Zacks estimates call for its revenue to pop another 16% in FY22 to hit $58.10 billion. Meanwhile, its adjusted earnings surged 33% last year, with it projected to jump 21% in FY22 to come in at $7.31 per share.
Peeking ahead, both its top and bottom lines are projected to pullback slightly (dip -2% YoY) in 2023 as Merck comes up against difficult to compete against periods. On the positive side, Merck last quarter raised its 2022 revenue and earnings guidance, with its upward earnings revisions helping MRK land a Zacks Rank #1 (Strong Buy) right now.
Merck’s history of quarterly earnings beats is solid, outside of a small stretch during 2021. It has topped our adjusted EPS estimates by an average of 18% in the trailing three quarters.
Image Source: Zacks Investment Research
Other Fundamentals
As we mentioned at the outset, Merck shares have shined in 2022. The stock is up roughly 22% YTD to top its highly-ranked Large Cap Pharma industry’s 15% run and blow away the S&P 500’s -15% drop. In fact, Merck closed regular trading Friday right near its all-time highs.
MRK shares have climbed 52% in the last five years to lag just behind its industry, with Merck up 120% in the past 10 years. The stock has trailed its peers over the trailing 36 months, but its 2022 run could signal it’s ready to outperform going forward.
Even though Merck is trading right around fresh highs, its valuation levels are enticing. MRK trades at 12.9X forward 12-month earnings at the moment, good enough for a 27% discount to its own five-year highs and 13% value compared to its industry’s current average. Merck is even trading 8% beneath its five-year median.
Merck’s strong 2022 and solid long-term performance helps make its 2.9% dividend yield all the more impressive. Its current yield tops its industry’s 2.5% average, the S&P 500’s 1.6%, and roughly matches the 30-year U.S. Treasury.
Wrapping Up
Merck is part of the Large Cap Pharmaceuticals space that’s in the top 21% of over 250 Zacks industries at the moment. Being part of a highly-ranked areas is normally advantageous for stocks and it’s crucial during bear markets and wider economic uncertainty.
Alongside its Zacks Rank #1 (Strong Buy) standing, 10 of the 18 brokerage recommendations Zacks has are “Strong Buys,” with the rest coming in at “Holds.”
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Bull of the Day: Merck & Co. (MRK)
Few areas of the economy are considered recession-proof. The wider healthcare field is part of that select group of sectors prepared to stay above any larger pullback in consumer spending and thrive even during a slowing U.S. economy.
Merck & Co. (MRK - Free Report) is a $240 billion market cap pharmaceutical titan that’s climbed over 20% in 2022. The firm is continuing to make acquisitions and many of Merck’s fundamentals make it an attractive play for the second half of 2022 and for years to come.
Oncology, Vaccines & Beyond
Merck is a diversified pharmaceutical company with offerings in areas such as oncology, vaccines, infectious diseases, diabetes, and beyond. One of its oncology stars is cancer-fighting drug Keytruda. Its first quarter sales climbed 23% to account for around 30% of total Q1 revenue.
Keytruda is an immunotherapy prescription medicine used to treat melanoma, non–small cell lung cancer, classical Hodgkin lymphoma (cHL), and more. Meanwhile, its HPV vaccinations Gardasil and Gardasil 9 soared 59%. Merck’s animal health segment climbed 4% overall.
Merck’s Covid-19 antiviral pill known as Lagevrio (molnupiravir) continued to shine as it competes against a similar offering from Pfizer. Both drugs aim to help treat Covid-19 and prevent hospitalizations. Merck’s offering has brought in tons of sales so far, with first quarter revenue coming at $3.25 billion, putting it behind only Keytruda in terms of total revenue.
Merck also bolstered its long-term portfolio last November when it bought Acceleron Pharma for roughly $11.5 billion. One of Acceleron’s prized offerings is an experimental drug for pulmonary arterial hypertension, which is a progressive and life-threatening blood vessel disorder. And it doesn’t appear that Merk will stop there, with the Wall Street Journal reporting recently that it’s in advanced talks to buy cancer-focused biotech company Seagen.
Image Source: Zacks Investment Research
Recent Growth and Outlook
Merck’s revenue climbed 6% in 2020 and 17% in 2021. Current Zacks estimates call for its revenue to pop another 16% in FY22 to hit $58.10 billion. Meanwhile, its adjusted earnings surged 33% last year, with it projected to jump 21% in FY22 to come in at $7.31 per share.
Peeking ahead, both its top and bottom lines are projected to pullback slightly (dip -2% YoY) in 2023 as Merck comes up against difficult to compete against periods. On the positive side, Merck last quarter raised its 2022 revenue and earnings guidance, with its upward earnings revisions helping MRK land a Zacks Rank #1 (Strong Buy) right now.
Merck’s history of quarterly earnings beats is solid, outside of a small stretch during 2021. It has topped our adjusted EPS estimates by an average of 18% in the trailing three quarters.
Image Source: Zacks Investment Research
Other Fundamentals
As we mentioned at the outset, Merck shares have shined in 2022. The stock is up roughly 22% YTD to top its highly-ranked Large Cap Pharma industry’s 15% run and blow away the S&P 500’s -15% drop. In fact, Merck closed regular trading Friday right near its all-time highs.
MRK shares have climbed 52% in the last five years to lag just behind its industry, with Merck up 120% in the past 10 years. The stock has trailed its peers over the trailing 36 months, but its 2022 run could signal it’s ready to outperform going forward.
Even though Merck is trading right around fresh highs, its valuation levels are enticing. MRK trades at 12.9X forward 12-month earnings at the moment, good enough for a 27% discount to its own five-year highs and 13% value compared to its industry’s current average. Merck is even trading 8% beneath its five-year median.
Merck’s strong 2022 and solid long-term performance helps make its 2.9% dividend yield all the more impressive. Its current yield tops its industry’s 2.5% average, the S&P 500’s 1.6%, and roughly matches the 30-year U.S. Treasury.
Wrapping Up
Merck is part of the Large Cap Pharmaceuticals space that’s in the top 21% of over 250 Zacks industries at the moment. Being part of a highly-ranked areas is normally advantageous for stocks and it’s crucial during bear markets and wider economic uncertainty.
Alongside its Zacks Rank #1 (Strong Buy) standing, 10 of the 18 brokerage recommendations Zacks has are “Strong Buys,” with the rest coming in at “Holds.”