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Buy, Sell or Hold MRK Stock Ahead of Q3 Earnings? Things to Know
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Key Takeaways
Merck will report Q3 results on Oct. 30, with consensus estimates at $17.06B for sales and $2.36 for EPS.
Keytruda, Lynparza and new drugs like Winrevair and Capvaxive are driving growth momentum.
Gardasil weakness in China and generic pressure weigh on MRK as it eyes a second-half recovery.
Merck (MRK - Free Report) will report its third-quarter 2025 earnings on Oct. 30, before market open. The Zacks Consensus Estimate for third-quarter sales and earnings is pegged at $17.06 billion and $2.36 per share, respectively. Earnings estimates for 2025 have declined from $8.94 to $8.92 per share over the past 30 days.
Image Source: Zacks Investment Research
Earnings Surprise History of Merck
The healthcare bellwether’s performance has been solid, with the company exceeding earnings expectations in each of the trailing four quarters. It delivered a four-quarter earnings surprise of 3.92%, on average. In the last reported quarter, the company delivered an earnings surprise of 5.97%, as seen in the chart below.
Per our proven model, companies with the combination of a positive Earnings ESP and a Zacks Rank #1, #2 (Buy) or #3 have a good chance of delivering an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Factors Shaping MRK’s Upcoming Results
After a weak sales performance in the first half, Merck expects to return to growth in the second half. It expects growth to be driven by oncology drugs, mainly Keytruda, Animal Health and new products, which are likely to have been partially offset by lower sales of Gardasil in China and Japan.
Performance of Merck’s Oncology Drugs
In oncology drugs, Keytruda sales are likely to have been driven by rapid uptake across earlier-stage indications globally, particularly early-stage non-small cell lung cancer. Continued strong momentum in metastatic indications is also expected to have boosted sales growth. The Zacks Consensus Estimate for Keytruda’s sales is $8.4 billion, while our estimate is $8.51 billion.
Higher alliance revenues from Lynparza, driven by increased demand, may have boosted oncology sales. Please note that Merck markets Lynparza in partnership with AstraZeneca (AZN - Free Report) .
Merck has a profit-sharing deal with AstraZeneca to co-market Lynparza and Koselugo. AstraZeneca and Merck’s Lynparza is approved for four cancer types: ovarian, breast, prostate and pancreatic. Lynparza is also being evaluated in combination with Keytruda in late-stage studies for lung cancer indications.
Alliance revenues from Lenvima may have also boosted oncology sales.
Sales of the new drug Welireg are likely to have benefited from higher demand in the United States as well as early launch uptake in certain European markets.
MRK’s Vaccines, Animal Health Segment and Other Drugs
With regard to the HPV vaccine, Gardasil, ex-U.S. sales are expected to have been hurt by lower demand in China due to a significant decline in demand and elevated channel inventory. Sales are likely to have declined in Japan, too. The Zacks Consensus Estimate for Gardasil is $1.75 billion, while our estimate is $1.70 billion.
Sales of some other Merck vaccines, like Proquad, M-M-R II, Varivax, Rotateq and Pneumovax 23, declined in the second quarter, a trend likely to have continued in the third quarter.
In the hospital specialty portfolio, generic competition in certain ex-U.S. markets is likely to have hurt sales of neuromuscular blockade medicine — Bridion injection. However, higher demand and pricing are expected to have benefited U.S. sales. The Zacks Consensus Estimate for Bridion is $436.4 million, while our estimate is $422.0 million.
Lower demand in the United States and China, and generic competition in most international markets, mainly Europe and the Asia Pacific, are likely to have hurt sales of the diabetes franchise (Januvia/Janumet).
New pulmonary arterial hypertension (PAH) drug Winrevair is likely to have contributed to sales growth, with most sales coming from the U.S. market, as the company is steadily adding new patients. Another new vaccine, Capvaxive, is also off to an encouraging start in the United States, gaining from rising demand in the retail pharmacy channel.
The Zacks Consensus Estimate for Merck’s Pharmaceutical unit is $15.3 billion, while our estimate is $15.4 billion.
In the Animal Health franchise, growth in both companion animal and livestock products is likely to have contributed to sales. Sales will also benefit from the inclusion of sales from the newly acquired Elanco’s aqua portfolio. The Zacks Consensus Estimate, as well as our estimate for the Animal Health unit, is $1.56 billion.
EPS in the third quarter will include a one-time charge of $300 million related to a payment made to LaNova for the technology transfer for MK-2010
Nonetheless, a single quarter’s results are not important for long-term investors. Let's delve deeper to understand whether to buy, sell or hold Merck stock.
MRK’s Price Performance & Valuation
Merck’s shares have lost 11.5% so far this year against an increase of 5.7% for the industry. The stock has also underperformed the sector and the S&P 500, as seen in the chart below.
From a valuation standpoint, Merck appears attractive relative to the industry. Going by the price/earnings ratio, the company’s shares currently trade at 9.42 forward earnings, lower than 15.58 for the industry as well as its 5-year mean of 12.63.
MRK Stock Valuation
Image Source: Zacks Investment Research
Investment Thesis on MRK’s Stock
Merck boasts more than six blockbuster drugs in its portfolio, with Keytruda being the key top-line driver. Keytruda has played an instrumental role in driving Merck’s steady revenue growth in the past few years. Last month, the FDA approved a subcutaneous formulation of Keytruda, known as Keytruda Qlex, which can enhance patient convenience.
MRK’s phase III pipeline has almost tripled since 2021, supported by in-house pipeline progress as well as the addition of candidates through M&A deals. This has positioned Merck to launch around 20 new vaccines and drugs over the next few years, with many having blockbuster potential. These include Capvaxive and Winrevair, which have the potential to generate significant revenues over the long term. Both products are off to a strong start.
Merck acquired Verona Pharma this year, which added the latter’s chronic obstructive pulmonary disease or COPD drug, Ohtuvayre, to its portfolio. This addition strengthens Merck’s cardio-pulmonary pipeline and portfolio as the drug’s differentiated profile provides a significant edge over its competitors. Ohtuvayre's commercial launch is off to a solid start. Investors will look for updates on Ohtuvayre's sales numbers on the third-quarter conference call.
Though Keytruda may be Merck’s biggest strength and a solid reason to own the stock, it can also be argued that the company is excessively dependent on the drug, and it should look for ways to diversify its product lineup.
There are rising concerns about the firm’s ability to grow its non-oncology business ahead of the upcoming loss of exclusivity of Keytruda in 2028.
Also, competitive pressure might increase for Keytruda in the near future from dual PD-1/VEGF inhibitors like Summit Therapeutics’ (SMMT - Free Report) ivonescimab that inhibit both the PD-1 pathway and the VEGF pathway at once. They are designed to overcome the limitations of single-target therapies like Keytruda. Pfizer (PFE - Free Report) also recently acquiredexclusive global ex-China rights to develop, manufacture and commercialize SSGJ-707, a dual PD-1 and VEGF inhibitor, from China’s 3SBio
Merck’s second-largest product, Gardasil, is also seeing grim sales in China. Merck is also seeing weakness in the diabetes franchise and the generic erosion of some drugs.
Long-Term Investors Can Stay Invested in MRK Stock
Merck’s problems are numerous at present, including persistent challenges for Gardasil in China, potential competition for Keytruda, and rising competitive and generic pressure on some of its drugs. All these factors have raised doubts about Merck’s ability to navigate the Keytruda loss-of-exclusivity period successfully. Consistently declining estimates and price depreciation reflect analysts’ pessimistic outlook for the stock.
However, Merck has one of the world’s best-selling drugs in its portfolio, generating billions of dollars in revenues. Though Keytruda will lose patent exclusivity in 2028, its sales are expected to remain strong until then.
No matter how the third-quarter results play out, we suggest that investors stay invested in MRK as the company expects to return to growth in the second half.
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Buy, Sell or Hold MRK Stock Ahead of Q3 Earnings? Things to Know
Key Takeaways
Merck (MRK - Free Report) will report its third-quarter 2025 earnings on Oct. 30, before market open. The Zacks Consensus Estimate for third-quarter sales and earnings is pegged at $17.06 billion and $2.36 per share, respectively. Earnings estimates for 2025 have declined from $8.94 to $8.92 per share over the past 30 days.
Earnings Surprise History of Merck
The healthcare bellwether’s performance has been solid, with the company exceeding earnings expectations in each of the trailing four quarters. It delivered a four-quarter earnings surprise of 3.92%, on average. In the last reported quarter, the company delivered an earnings surprise of 5.97%, as seen in the chart below.
Image Source: Zacks Investment Research
What Does Our Model Say for MRK?
Merck has an Earnings ESP of -0.09% and a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Per our proven model, companies with the combination of a positive Earnings ESP and a Zacks Rank #1, #2 (Buy) or #3 have a good chance of delivering an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Factors Shaping MRK’s Upcoming Results
After a weak sales performance in the first half, Merck expects to return to growth in the second half. It expects growth to be driven by oncology drugs, mainly Keytruda, Animal Health and new products, which are likely to have been partially offset by lower sales of Gardasil in China and Japan.
Performance of Merck’s Oncology Drugs
In oncology drugs, Keytruda sales are likely to have been driven by rapid uptake across earlier-stage indications globally, particularly early-stage non-small cell lung cancer. Continued strong momentum in metastatic indications is also expected to have boosted sales growth. The Zacks Consensus Estimate for Keytruda’s sales is $8.4 billion, while our estimate is $8.51 billion.
Higher alliance revenues from Lynparza, driven by increased demand, may have boosted oncology sales. Please note that Merck markets Lynparza in partnership with AstraZeneca (AZN - Free Report) .
Merck has a profit-sharing deal with AstraZeneca to co-market Lynparza and Koselugo. AstraZeneca and Merck’s Lynparza is approved for four cancer types: ovarian, breast, prostate and pancreatic. Lynparza is also being evaluated in combination with Keytruda in late-stage studies for lung cancer indications.
Alliance revenues from Lenvima may have also boosted oncology sales.
Sales of the new drug Welireg are likely to have benefited from higher demand in the United States as well as early launch uptake in certain European markets.
MRK’s Vaccines, Animal Health Segment and Other Drugs
With regard to the HPV vaccine, Gardasil, ex-U.S. sales are expected to have been hurt by lower demand in China due to a significant decline in demand and elevated channel inventory. Sales are likely to have declined in Japan, too. The Zacks Consensus Estimate for Gardasil is $1.75 billion, while our estimate is $1.70 billion.
Sales of some other Merck vaccines, like Proquad, M-M-R II, Varivax, Rotateq and Pneumovax 23, declined in the second quarter, a trend likely to have continued in the third quarter.
In the hospital specialty portfolio, generic competition in certain ex-U.S. markets is likely to have hurt sales of neuromuscular blockade medicine — Bridion injection. However, higher demand and pricing are expected to have benefited U.S. sales. The Zacks Consensus Estimate for Bridion is $436.4 million, while our estimate is $422.0 million.
Lower demand in the United States and China, and generic competition in most international markets, mainly Europe and the Asia Pacific, are likely to have hurt sales of the diabetes franchise (Januvia/Janumet).
New pulmonary arterial hypertension (PAH) drug Winrevair is likely to have contributed to sales growth, with most sales coming from the U.S. market, as the company is steadily adding new patients. Another new vaccine, Capvaxive, is also off to an encouraging start in the United States, gaining from rising demand in the retail pharmacy channel.
The Zacks Consensus Estimate for Merck’s Pharmaceutical unit is $15.3 billion, while our estimate is $15.4 billion.
In the Animal Health franchise, growth in both companion animal and livestock products is likely to have contributed to sales. Sales will also benefit from the inclusion of sales from the newly acquired Elanco’s aqua portfolio. The Zacks Consensus Estimate, as well as our estimate for the Animal Health unit, is $1.56 billion.
EPS in the third quarter will include a one-time charge of $300 million related to a payment made to LaNova for the technology transfer for MK-2010
Nonetheless, a single quarter’s results are not important for long-term investors. Let's delve deeper to understand whether to buy, sell or hold Merck stock.
MRK’s Price Performance & Valuation
Merck’s shares have lost 11.5% so far this year against an increase of 5.7% for the industry. The stock has also underperformed the sector and the S&P 500, as seen in the chart below.
Merck Stock Underperforms Industry, Sector & S&P 500
From a valuation standpoint, Merck appears attractive relative to the industry. Going by the price/earnings ratio, the company’s shares currently trade at 9.42 forward earnings, lower than 15.58 for the industry as well as its 5-year mean of 12.63.
MRK Stock Valuation
Investment Thesis on MRK’s Stock
Merck boasts more than six blockbuster drugs in its portfolio, with Keytruda being the key top-line driver. Keytruda has played an instrumental role in driving Merck’s steady revenue growth in the past few years. Last month, the FDA approved a subcutaneous formulation of Keytruda, known as Keytruda Qlex, which can enhance patient convenience.
MRK’s phase III pipeline has almost tripled since 2021, supported by in-house pipeline progress as well as the addition of candidates through M&A deals. This has positioned Merck to launch around 20 new vaccines and drugs over the next few years, with many having blockbuster potential. These include Capvaxive and Winrevair, which have the potential to generate significant revenues over the long term. Both products are off to a strong start.
Merck acquired Verona Pharma this year, which added the latter’s chronic obstructive pulmonary disease or COPD drug, Ohtuvayre, to its portfolio. This addition strengthens Merck’s cardio-pulmonary pipeline and portfolio as the drug’s differentiated profile provides a significant edge over its competitors. Ohtuvayre's commercial launch is off to a solid start. Investors will look for updates on Ohtuvayre's sales numbers on the third-quarter conference call.
Though Keytruda may be Merck’s biggest strength and a solid reason to own the stock, it can also be argued that the company is excessively dependent on the drug, and it should look for ways to diversify its product lineup.
There are rising concerns about the firm’s ability to grow its non-oncology business ahead of the upcoming loss of exclusivity of Keytruda in 2028.
Also, competitive pressure might increase for Keytruda in the near future from dual PD-1/VEGF inhibitors like Summit Therapeutics’ (SMMT - Free Report) ivonescimab that inhibit both the PD-1 pathway and the VEGF pathway at once. They are designed to overcome the limitations of single-target therapies like Keytruda. Pfizer (PFE - Free Report) also recently acquiredexclusive global ex-China rights to develop, manufacture and commercialize SSGJ-707, a dual PD-1 and VEGF inhibitor, from China’s 3SBio
Merck’s second-largest product, Gardasil, is also seeing grim sales in China. Merck is also seeing weakness in the diabetes franchise and the generic erosion of some drugs.
Long-Term Investors Can Stay Invested in MRK Stock
Merck’s problems are numerous at present, including persistent challenges for Gardasil in China, potential competition for Keytruda, and rising competitive and generic pressure on some of its drugs. All these factors have raised doubts about Merck’s ability to navigate the Keytruda loss-of-exclusivity period successfully. Consistently declining estimates and price depreciation reflect analysts’ pessimistic outlook for the stock.
However, Merck has one of the world’s best-selling drugs in its portfolio, generating billions of dollars in revenues. Though Keytruda will lose patent exclusivity in 2028, its sales are expected to remain strong until then.
No matter how the third-quarter results play out, we suggest that investors stay invested in MRK as the company expects to return to growth in the second half.