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Merck (MRK) Q2 Earnings: Will the Stock Pull a Surprise?
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Merck & Co. Inc. (MRK - Free Report) is scheduled to report its second quarter 2016 earnings results on Jul 29, before the opening bell. Last quarter, Merck had posted a positive earnings surprise of 4.71%. Let’s see how things are shaping up for the company this quarter.
New Products In Focus
Merck will continue to face headwinds in the form of genericization as well as unfavorable currency movement and the impact of the Venezuelan financial crisis.
However, new products should start contributing significantly from 2016 with performance being driven by products like Keytruda (cancer) and Zepatier (HCV). Strong uptake, launches in additional countries and expansion into additional indications should drive Keytruda sales.
Investors will also be focused on the performance of Merck’s DPP-4 inhibitor, Januvia, including the impact of pricing pressure and whether it is losing any share to SGLT2.
Meanwhile, Remicade will continue to feel the pressure of biosimilar competition in Europe with sales expected to decline at a rapid pace through 2016. Slowing growth of the integrase class and continued competitor dynamics in the U.S. and Europe will affect Isentress sales. Cubicin and Nasonex will be under pressure given the loss of exclusivity.
However, Merck’s cost-cutting efforts, share buybacks and other strategic initiatives should drive the bottom line.
Surprise History
Merck’s performance has been pretty impressive with the company beating earnings expectations consistently. The average earnings beat over the last four quarters is +4.98
Our proven model does not conclusively show that Merck is likely to beat estimates this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) to be able to beat earnings. That is not the case here as you will see below.
Zacks ESP: The Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is 0.00% since the Most Accurate estimate is in line with the Zacks Consensus Estimate at 92 cents per share.
Zacks Rank: Merck carries a Zacks Rank #3. Merck’s Zacks Rank #3 when combined with an ESP of 0.00% makes surprise prediction difficult.
We caution against stocks with a Zacks Rank #4 and #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks That Warrant a Look
Here are some health care stocks that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter.
The Earnings ESP for Amgen Inc. (AMGN - Free Report) is +1.10% and it carries a Zacks Rank #3. The company will release second-quarter results on Jul 27.
Intercept Pharmaceuticals, Inc. has an Earnings ESP of +7.45% and carries a Zacks Rank #3. It is expected to report second-quarter results on Aug 3.
BioMarin Pharmaceutical Inc. (BMRN - Free Report) has an Earnings ESP of +4.00% and carries a Zacks Rank #3. It will be reporting second-quarter results on Aug 4.
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Merck (MRK) Q2 Earnings: Will the Stock Pull a Surprise?
Merck & Co. Inc. (MRK - Free Report) is scheduled to report its second quarter 2016 earnings results on Jul 29, before the opening bell. Last quarter, Merck had posted a positive earnings surprise of 4.71%. Let’s see how things are shaping up for the company this quarter.
New Products In Focus
Merck will continue to face headwinds in the form of genericization as well as unfavorable currency movement and the impact of the Venezuelan financial crisis.
However, new products should start contributing significantly from 2016 with performance being driven by products like Keytruda (cancer) and Zepatier (HCV). Strong uptake, launches in additional countries and expansion into additional indications should drive Keytruda sales.
Investors will also be focused on the performance of Merck’s DPP-4 inhibitor, Januvia, including the impact of pricing pressure and whether it is losing any share to SGLT2.
Meanwhile, Remicade will continue to feel the pressure of biosimilar competition in Europe with sales expected to decline at a rapid pace through 2016. Slowing growth of the integrase class and continued competitor dynamics in the U.S. and Europe will affect Isentress sales. Cubicin and Nasonex will be under pressure given the loss of exclusivity.
However, Merck’s cost-cutting efforts, share buybacks and other strategic initiatives should drive the bottom line.
Surprise History
Merck’s performance has been pretty impressive with the company beating earnings expectations consistently. The average earnings beat over the last four quarters is +4.98
MERCK & CO INC Price and EPS Surprise
MERCK & CO INC Price and EPS Surprise | MERCK & CO INC Quote
Earnings Whispers?
Our proven model does not conclusively show that Merck is likely to beat estimates this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) to be able to beat earnings. That is not the case here as you will see below.
Zacks ESP: The Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is 0.00% since the Most Accurate estimate is in line with the Zacks Consensus Estimate at 92 cents per share.
Zacks Rank: Merck carries a Zacks Rank #3. Merck’s Zacks Rank #3 when combined with an ESP of 0.00% makes surprise prediction difficult.
We caution against stocks with a Zacks Rank #4 and #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks That Warrant a Look
Here are some health care stocks that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter.
The Earnings ESP for Amgen Inc. (AMGN - Free Report) is +1.10% and it carries a Zacks Rank #3. The company will release second-quarter results on Jul 27.
Intercept Pharmaceuticals, Inc. has an Earnings ESP of +7.45% and carries a Zacks Rank #3. It is expected to report second-quarter results on Aug 3.
BioMarin Pharmaceutical Inc. (BMRN - Free Report) has an Earnings ESP of +4.00% and carries a Zacks Rank #3. It will be reporting second-quarter results on Aug 4.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>