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Merck & Co. Inc. (MRK - Analyst Report) is scheduled to report fourth quarter 2013 results before the opening bell on Feb 5. Last quarter, Merck had posted an earnings surprise of +4.55%. Let’s see how things are shaping up for this announcement.

Factors at Play

In addition to facing generic competition for several products, Merck’s top-line will remain under pressure with Januvia’s performance lagging expectations. Although Merck is working on reviving sales, we remain concerned about the rebate and pricing pressure being faced by Januvia due to the entry of new products in the diabetes market.

Meanwhile, the performance of the vaccine segment and the cost-cutting efforts should partially offset the impact of genericization.

Earnings Whispers?

Our proven model does not conclusively show that Merck is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP (Expected Surprise Prediction) and a Zacks Rank of #1, 2 or 3 for this to happen. That is not the case here as you will see below.

Zacks ESP: The Earnings ESP for Merck is -1.12% since the Most Accurate estimate is $0.88 while the Zacks Consensus Estimate is $0.89.

Zacks #3 Rank (Hold): Merck’s Zacks Rank #3 (Hold) has little effect on the predictive power of ESP because the Zacks Rank #3 when combined with a negative ESP makes surprise prediction difficult.

Other Stocks to Consider

Here are some other companies you may want to consider as our model shows that they have the right combination of elements, i.e., a positive Zacks Earnings ESP and a Zacks Rank #1, #2 or #3.

Actavis plc (ACT - Analyst Report) has an Earnings ESP of +0.66% and holds a Zacks Rank #1 (Strong Buy). Actavis will be reporting fourth quarter earnings on Feb 20.

Sanofi (SNY - Analyst Report) has earnings ESP of +2.27% and holds a Zacks Rank #3. Sanofi will report fourth quarter earnings on Feb 6.

Allergan Inc. (AGN - Analyst Report) has earnings ESP of +0.75% and holds a Zacks Rank #2 (Buy). Allergan will report fourth quarter earnings on Feb 5.

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