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Merck (MRK) to Report Q2 Earnings: What's in the Cards?

Merck MRK will report second-quarter 2021 results on Jul 29 before market open. In the last-reported quarter, the company delivered a negative earnings surprise of 14.11%.

The large drugmaker’s performance has been mixed, with the company exceeding earnings expectations in two of the trailing four quarters while missing in the other two. The company delivered a four-quarter earnings surprise of 5.99%, on average.

Merck & Co., Inc. Price and EPS Surprise

Merck & Co., Inc. price-eps-surprise | Merck & Co., Inc. Quote

Merck’s stock has declined 5.2% this year so far against an increase of 11.7% for the industry.

Image Source: Zacks Investment Research

Factors to Consider

The pandemic is likely to have hurt Merck’s performance in the second quarter of 2021 too, most notably with respect to vaccine sales in the United States. Merck’s vaccines sales are likely to have been hurt by reduced patient access to doctors and prioritization of COVID-19 vaccinations. Important vaccines are HPV vaccine, Gardasil/Gardasil 9 and Proquad, M-M-R II and Varivax vaccines. With regard to Gardasil, Merck had said in the first quarter that it plans to re-allocate doses of Gardasil to markets outside the United States to make up for lower demand in the domestic market due to the pandemic. It remains to be seen if the strategy improved Gardasil sales in the second quarter when the company reports. Also, the impact of lower infection rates on sales of vaccines in the second quarter is to be seen. The Zacks Consensus Estimate for Gardasil is $1.04 billion. The Zacks Consensus Estimate for total vaccine sales is $2.07 billion.

However, strong demand for cancer drugs is likely to have boosted sales growth in the second 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. Cancer screenings and patient diagnosis are expected to have returned to normal levels in the second quarter, benefiting sales. However, the impact of COVID-19 (which can lower new patient starts) and pricing pressure in Europe and Japan might have hurt sales to an extent. The Zacks Consensus Estimate for Keytruda’s sales is $4.2 billion.

Alliance revenues from Lynparza may have contributed to higher oncology sales. Please note that Merck markets Lynparza in partnership with AstraZeneca AZN. Alliance revenues from Lenvima may have been hurt due to rising competition in hepatocellular carcinoma. The Zacks Consensus Estimate for alliance revenues from Lynparza and Lenvima are $210 million and $161 million, respectively.

In the hospital specialty portfolio, higher demand may have benefited sales of Bridion Injection. The Zacks Consensus Estimate for Bridion is $362 million.

Meanwhile, the top-line results are expected to reflect the impact of loss of U.S. market exclusivity for drugs like Remicade, Noxafil and Zetia, continued pricing pressure on the diabetes franchise (Januvia/Janumet) in the United States, and lower demand in Europe.

The Animal Health franchise is likely to have witnessed strong sales growth driven by higher demand. The Zacks Consensus Estimate for Animal Health unit is $1.44 billion.

In June, Merck completed the spinoff of its Women’s Health unit, legacy drugs and biosimilar products into a new publicly traded company called Organon & Co OGN. Following the completion of the spin-off, Merck is expected to update its 2021 financial guidance on the second-quarter conference call.

Earnings Whispers

Our proven model does not conclusively predict an earnings beat for Merck this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that is not the case here.

Earnings ESP: Merck’s Earnings ESP is 0.00% as the Zacks Consensus Estimate as well as the Most Accurate Estimate is pegged at $1.33 per share. 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 #4 (Sell).

Stock to Consider

Here is a large drug stock that has the right combination of elements to beat on earnings this time around

Pfizer PFE has an Earnings ESP of +2.33% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

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AstraZeneca PLC (AZN): Free Stock Analysis Report
Pfizer Inc. (PFE): Free Stock Analysis Report
Merck & Co., Inc. (MRK): Free Stock Analysis Report
Organon & Co. (OGN): Free Stock Analysis Report
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