A month has gone by since the last earnings report for Merck (MRK Quick QuoteMRK - Free Report) . Shares have added about 18.2% in that time frame, outperforming the S&P 500.

But investors have to be wondering, will the recent positive trend continue leading up to its next earnings release, or is Merck due for a pullback? Well, first let's take a quick look at its most recent earnings report in order to get a better handle on the recent catalysts for Merck & Co., Inc. before we dive into how investors and analysts have reacted as of late.

Q2 Earnings & Sales Beat Estimates

Merck reported an adjusted loss of 13 cents per share for the second quarter of 2026, narrower than the Zacks Consensus Estimate of a loss of 26 cents. In the year-ago quarter, the company reported adjusted earnings of $2.13 per share.

Including acquisition and divestiture-related costs, restructuring costs, income and losses from investments in equity securities and certain other items, loss was 54 cents per share in the second quarter versus earnings of $1.76 per share in the year-ago quarter.

Adjusted as well as reported earnings included a charge of $2.31 per share recorded in the quarter related to the acquisition of Terns Pharmaceuticals, which was completed during the period.

Revenues in the second quarter increased 5% year over year on a reported basis and 4% excluding foreign exchange (Fx) to $16.61 billion. Sales beat the Zacks Consensus Estimate of $16.33 billion. Higher sales of oncology drugs, including Keytruda and contributions from new products like Winrevair, Welireg and Capvaxive, and the Animal Health segment were partially offset by lower sales of Gardasil and some other vaccines.

Quarter in Detail

The Pharmaceutical segment generated revenues of $14.76 billion, up 5% year over year (4% excluding FX). Pharmaceutical segment revenues beat the Zacks Consensus Estimate of $14.28 billion.

All sales growth numbers discussed below exclude FX impact.

Oncology Drugs

Combined sales of Keytruda and Keytruda Qlex increased 4% to $8.37 billion. The reported figure topped the Zacks Consensus Estimate of $8.06 billion. 

Sales of Keytruda benefited from rapid uptake across earlier-stage indications and continued strong momentum in metastatic indications. 

Keytruda sales in the second quarter included $463 million in sales of Keytruda Qlex, the subcutaneous formulation of Keytruda, compared to $128 million in the previous quarter as patient adoption has increased since the permanent J-code was established in April.

Merck is seeing an increase in usage of Keytruda in tumors that primarily affect women, including cervical and breast cancers, as well as Keytruda in combination with Padcev in first-line, locally advanced or metastatic urothelial cancer.

Merck said on the conference call that Keytruda’s U.S. growth will moderate as penetration peaks in several indications. The comparison will also be impacted by a $250 million wholesaler purchase benefit in the third quarter of 2025.

On the conference call, Merck’s CEO Robert Davis said that the Keytruda exclusivity transition will create a shallow decline followed by a fast return to growth.

Alliance revenues from Lynparza declined 2% to $365 million in the quarter. Lenvima alliance revenues increased 6% to $283 million, driven by higher U.S. demand, partly offset by lower net pricing.

Welireg sales surged 67% to $271 million, reflecting higher demand in the United States for certain previously treated advanced renal cell carcinoma patients and continued launch uptake across international markets, particularly Japan. Favorable wholesaler purchasing patterns in the United States also aided performance.

Vaccines

In vaccines, sales of HPV vaccines — Gardasil and Gardasil 9 — rose 3% to $1.17 billion. Higher demand in the Asia Pacific and Europe, along with favorable tender timing in Europe, supported the franchise. These gains were partly offset by lower demand and unfavorable timing of CDC purchases in the United States. Gardasil/Gardasil 9 sales missed the Zacks Consensus Estimate of $1.18 billion.

Combined sales of ProQuad, M-M-R II and Varivax declined 3% to $592 million, mainly due to lower demand in the United States. 

Sales of the pneumococcal 15-valent conjugate vaccine Vaxneuvance declined 36% to $148 million due to lower demand in the United States and most international markets as well as unfavorable comparison to the prior year quarter, as public-sector activity in the United States increased sales in that period.

Capvaxive sales increased 40% to $184 million, driven by increased demand in the United States and continued launch uptake in some international markets. 

Sales of the new RSV vaccine, Enflonsia, in the United States were $2 million in the second quarter of 2026 compared with $1 million in the first quarter.

Other Drugs

In the infectious disease portfolio, Bridion sales rose 8% to $497 million due to higher demand and pricing in the United States, partially offset by lower demand in most international markets due to generic competition. Bridion lost patent exclusivity in the United States in July 2026. However, Merck expects that U.S. sales will decline at a slower pace than previously expected due to lower-than-anticipated generic competition.

Prevymis sales increased 28% to $295 million, driven by higher demand in the United States and certain European markets.

Januvia/Janumet franchise sales fell 31% year over year to $429 million. Sales of the drug declined due to lower demand and net pricing in the United States due to competition, as well as lower demand in China and most other international markets amid ongoing generic competition.

Winrevair sales jumped 75% to $588 million, reflecting continued strong demand in the United States and early launch momentum across international markets, particularly Japan and Europe.

Ohtuvayre, added from the October 2025 acquisition of Verona Pharma, contributed $204 million in sales in the second quarter compared with $131 million in the previous quarter. Revenues in the second quarter benefitted from continued prescription demand as well as favorable timing of specialty pharmacy purchases. However, third-quarter revenues will be hurt by the unwinding of specialty pharmacy purchases. Merck is investing in salesforce expansion and patient support to drive accelerated growth in 2027.

Regarding its newly launched HIV pill, Idvynso, Merck said it is seeing encouraging early progress on access and reimbursement.

Merck’s Animal Health segment generated revenues of $1.78 billion, up 8% year over year on a reported basis and 5% excluding FX. This growth was driven by higher demand for livestock as well as companion animal products. Sales from this segment marginally beat the Zacks Consensus Estimate of $1.77 billion.

Sales of livestock products rose 6% to $1.04 billion, driven by higher demand for ruminant and poultry products. Sales of companion animal products rose 5% to $734 million, driven by new product launches.

Margin Discussion

Adjusted gross margin was 81.1%, down 110 basis points year over year due to higher inventory write-offs.

Adjusted selling, general and administrative expenses rose 10% to $2.89 billion, reflecting higher administrative and promotional spending.

Adjusted research and development expenses increased almost 144% to $9.74 billion in the quarter due to a significantly higher charge of $5.7 billion related to the Terns acquisition compared to a $200 million business development charge a year ago.

Excluding these business development charges, operating expenses grew 7% in the quarter.

2026 Sales Guidance Upped, EPS Range Lowered

Merck raised its sales guidance for 2026 while lowering its adjusted EPS range to include acquisition costs.

The company now expects revenues to be in the range of $66.3-$67.3 billion, compared with the previous expectation of $65.8-$67.0 billion. The new range indicates year-over-year growth of 2% to 4%.

The company now expects adjusted earnings of $2.66-$2.76 per share, down from its previous guidance of $5.04-$5.16. The revised range includes a one-time charge of $2.43 per share related to the Terns acquisition.

The 2026 guidance represents a significant decline from adjusted EPS of $8.98 in 2025 due to higher charges related to business development transactions. In 2025, Merck recorded a one-time charge of 20 cents per share related to business development transactions.

The guidance includes a positive impact from Fx of approximately 1% on sales and around 15 cents on EPS.

The adjusted gross margin is expected to be around 81%, lower than the prior expectation of approximately 82% due to higher inventory reserves.

Adjusted operating expenses are now expected to be in the range of $42.0-$42.7 billion compared with the earlier projection of $36.0 billion to $36.8 billion. The adjusted tax rate guidance was raised to 35-36% compared with the previous guidance of 23.5-24.5%.

In 2026, Merck expects to buy back shares worth $3 billion.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month.

VGM Scores

Currently, Merck has a average Growth Score of C, a grade with the same score on the momentum front. Following the exact same course, the stock has a score of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Merck has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Merck is part of the Zacks Large Cap Pharmaceuticals industry. Over the past month, Novartis (NVS Quick QuoteNVS - Free Report) , a stock from the same industry, has gained 5.2%. The company reported its results for the quarter ended June 2026 more than a month ago.

Novartis reported revenues of $14.41 billion in the last reported quarter, representing a year-over-year change of +2.5%. EPS of $2.41 for the same period compares with $2.42 a year ago.

For the current quarter, Novartis is expected to post earnings of $2.24 per share, indicating a change of -0.4% from the year-ago quarter. The Zacks Consensus Estimate has changed -0.7% over the last 30 days.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Novartis. Also, the stock has a VGM Score of D.