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Will Merck (MRK) Succeed in Beating Q4 Earnings Expectations?
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We expect Merck (MRK - Free Report) to beat expectations when it reports fourth-quarter and full-year 2021 results on Feb 3, before market open. In the last reported quarter, the company delivered an earnings surprise of 13.64%.
The large drugmaker’s performance has been rather weak, with the company missing earnings expectations in three of the trailing four quarters while beating in one. The company delivered a four-quarter negative earnings surprise of 1.23%, on average.
Merck’s stock has risen 13.8% in the past year compared with an increase of 22.2% for the industry.
Image Source: Zacks Investment Research
Factors to Consider
In the fourth quarter, though Merck expects some negative effects from the pandemic on its business performance to persist, demand is likely to have improved as the company believes that global health systems and people have largely adapted to the effects of the pandemic. However, the impact of high infection rates in the fourth quarter due to the Omicron variant is to be seen. Strong commercial execution and higher demand are expected to have boosted sales of most drugs.
The strong demand for cancer drugs is likely to have boosted sales growth in the fourth quarter.
In oncology drugs, Keytruda sales are likely to have been driven by continued strong momentum in lung cancer indications and continued uptake in newer indications. The Zacks Consensus Estimate for Keytruda’s sales is $4.61 billion. Higher alliance revenues from Lynparza driven by continued uptake across the multiple approved indications in the United States and Europe may have boosted oncology sales. Please note that Merck markets Lynparza in partnership with AstraZeneca (AZN - Free Report) . The Zacks Consensus Estimate for alliance revenues from Lynparza is $249 million.
AstraZeneca and Merck formed the profit-sharing deal to co-market Lynparza and Koselugo in July 2017.
AstraZeneca and Merck’s Lynparza is approved for four cancer types namely, ovarian, breast, prostate and pancreatic. Lynparza is also being evaluated in an earlier-line setting for the approved cancer indications.
Alliance revenues from Lenvima may have also boosted oncology sales.
In the hospital specialty portfolio, higher demand reflecting ongoing recovery from the pandemic may have benefited sales of Bridion Injection. The Zacks Consensus Estimate for Bridion is $389million.
Merck’s vaccines portfolio is witnessing continued recovery due to the return to a more normal level of wellness visits. It remains to be seen if the positive trend continued in the fourth quarter amid rising infection rates. Important vaccines are HPV vaccine, Gardasil/Gardasil 9 and Proquad, M-M-R II and Varivax vaccines. With regard to Gardasil, sales are expected to have improved in the fourth quarter but at a lower pace than the third quarter due to normal seasonality. The ongoing ex-U.S. demand and increased supply are expected to have driven fourth-quarter performance. The Zacks Consensus Estimate for Gardasil is $1.26 billion.
Meanwhile, the top line is expected to reflect the impact of the loss of U.S. market exclusivity for drugs like Remicade, Noxafil and Zetia and continued pricing pressure for the diabetes franchise (Januvia/Janumet) in the United States and lower demand in Europe.
The Animal Health franchise is expected to have seen strong sales growth helped by growth across geographies and species.
Key Approval in Q4
In late December, the FDA granted Emergency Use Authorization (EUA) to Merck and partner Ridgeback Biotherapeutics’ oral antiviral pill, molnupiravir for treating high-risk adults with mild-to-moderate COVID-19. However, Merck’s pill can only be prescribed for whom alternative COVID-19 treatment options authorized by the FDA are not accessible or clinically appropriate. It cannot also be prescribed as the first treatment for patients hospitalized due to COVID-19 or for pregnant women. The authorization of molnupiravir was based on data from the phase III MOVe-OUT study. Data from the final analysis of the MOVe-OUT study showed that the medicine reduced the risk of hospitalization or death by approximately 30% in non-hospitalized at-risk adult patients with mild-or-moderate COVID-19, which was less than 50% as previously reported, per interim data announced in October. Molnupiravir was approved in the United Kingdom in November.
Earnings Whispers
Our proven model predicts an earnings beat for Merck in the to-be-reported quarter. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for a likely positive surprise. This is the case here.
Earnings ESP: Merck’s Earnings ESP is +9.03% as the Most Accurate Estimate of $1.54 is higher than the Zacks Consensus Estimate of $1.41. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Merck has a Zacks Rank #3
Other Stocks to Consider
Here are some other large drug/biotech stocks that have the right combination of elements to beat on earnings this time around:
Pfizer (PFE - Free Report) has an Earnings ESP of +3.18% and a Zacks Rank #1
Pfizer’s stock has risen 52.4% in the past year. Estimates for Pfizer’s 2022 earnings have gone up from $4.59 to $6.14 over the past 60 days.
Pfizer’s earnings performance has been mixed, with the company exceeding earnings expectations in three of the last four quarters while missing in one. PFE has a four-quarter earnings surprise of 10.85%, on average.
Amgen (AMGN - Free Report) has an Earnings ESP of +2.53% and a Zacks Rank #3.Amgen’s stock has declined 2.9% in the past year.
Amgen also topped earnings estimates in three of the last four quarters. Amgen has a four-quarter earnings surprise of 5.65%, on average.
Image: Shutterstock
Will Merck (MRK) Succeed in Beating Q4 Earnings Expectations?
We expect Merck (MRK - Free Report) to beat expectations when it reports fourth-quarter and full-year 2021 results on Feb 3, before market open. In the last reported quarter, the company delivered an earnings surprise of 13.64%.
The large drugmaker’s performance has been rather weak, with the company missing earnings expectations in three of the trailing four quarters while beating in one. The company delivered a four-quarter negative earnings surprise of 1.23%, on average.
Merck’s stock has risen 13.8% in the past year compared with an increase of 22.2% for the industry.
Factors to Consider
In the fourth quarter, though Merck expects some negative effects from the pandemic on its business performance to persist, demand is likely to have improved as the company believes that global health systems and people have largely adapted to the effects of the pandemic. However, the impact of high infection rates in the fourth quarter due to the Omicron variant is to be seen. Strong commercial execution and higher demand are expected to have boosted sales of most drugs.
The strong demand for cancer drugs is likely to have boosted sales growth in the fourth quarter.
In oncology drugs, Keytruda sales are likely to have been driven by continued strong momentum in lung cancer indications and continued uptake in newer indications. The Zacks Consensus Estimate for Keytruda’s sales is $4.61 billion. Higher alliance revenues from Lynparza driven by continued uptake across the multiple approved indications in the United States and Europe may have boosted oncology sales. Please note that Merck markets Lynparza in partnership with AstraZeneca (AZN - Free Report) . The Zacks Consensus Estimate for alliance revenues from Lynparza is $249 million.
AstraZeneca and Merck formed the profit-sharing deal to co-market Lynparza and Koselugo in July 2017.
AstraZeneca and Merck’s Lynparza is approved for four cancer types namely, ovarian, breast, prostate and pancreatic. Lynparza is also being evaluated in an earlier-line setting for the approved cancer indications.
Alliance revenues from Lenvima may have also boosted oncology sales.
In the hospital specialty portfolio, higher demand reflecting ongoing recovery from the pandemic may have benefited sales of Bridion Injection. The Zacks Consensus Estimate for Bridion is $389million.
Merck’s vaccines portfolio is witnessing continued recovery due to the return to a more normal level of wellness visits. It remains to be seen if the positive trend continued in the fourth quarter amid rising infection rates. Important vaccines are HPV vaccine, Gardasil/Gardasil 9 and Proquad, M-M-R II and Varivax vaccines. With regard to Gardasil, sales are expected to have improved in the fourth quarter but at a lower pace than the third quarter due to normal seasonality. The ongoing ex-U.S. demand and increased supply are expected to have driven fourth-quarter performance. The Zacks Consensus Estimate for Gardasil is $1.26 billion.
Meanwhile, the top line is expected to reflect the impact of the loss of U.S. market exclusivity for drugs like Remicade, Noxafil and Zetia and continued pricing pressure for the diabetes franchise (Januvia/Janumet) in the United States and lower demand in Europe.
The Animal Health franchise is expected to have seen strong sales growth helped by growth across geographies and species.
Key Approval in Q4
In late December, the FDA granted Emergency Use Authorization (EUA) to Merck and partner Ridgeback Biotherapeutics’ oral antiviral pill, molnupiravir for treating high-risk adults with mild-to-moderate COVID-19. However, Merck’s pill can only be prescribed for whom alternative COVID-19 treatment options authorized by the FDA are not accessible or clinically appropriate. It cannot also be prescribed as the first treatment for patients hospitalized due to COVID-19 or for pregnant women. The authorization of molnupiravir was based on data from the phase III MOVe-OUT study. Data from the final analysis of the MOVe-OUT study showed that the medicine reduced the risk of hospitalization or death by approximately 30% in non-hospitalized at-risk adult patients with mild-or-moderate COVID-19, which was less than 50% as previously reported, per interim data announced in October. Molnupiravir was approved in the United Kingdom in November.
Earnings Whispers
Our proven model predicts an earnings beat for Merck in the to-be-reported quarter. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for a likely positive surprise. This is the case here.
Earnings ESP: Merck’s Earnings ESP is +9.03% as the Most Accurate Estimate of $1.54 is higher than the Zacks Consensus Estimate of $1.41. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Merck has a Zacks Rank #3
Other Stocks to Consider
Here are some other large drug/biotech stocks that have the right combination of elements to beat on earnings this time around:
Pfizer (PFE - Free Report) has an Earnings ESP of +3.18% and a Zacks Rank #1
Pfizer’s stock has risen 52.4% in the past year. Estimates for Pfizer’s 2022 earnings have gone up from $4.59 to $6.14 over the past 60 days.
Pfizer’s earnings performance has been mixed, with the company exceeding earnings expectations in three of the last four quarters while missing in one. PFE has a four-quarter earnings surprise of 10.85%, on average.
Amgen (AMGN - Free Report) has an Earnings ESP of +2.53% and a Zacks Rank #3.Amgen’s stock has declined 2.9% in the past year.
Amgen also topped earnings estimates in three of the last four quarters. Amgen has a four-quarter earnings surprise of 5.65%, on average.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.