blue and silver stetoscope

Merck (NYSE:MRK) Q3 Earnings: What Can You Expect?

in EARNINGS/INVESTING IDEAS by

Merck & Co., Inc. (NYSE:MRK) is scheduled to report Q3 earnings results on October 27, 2020.

The company is expected to report earnings of $1.43/share on revenue of $12.192 billion. The consensus earnings per share (EPS) of $1.43/share is based on a poll of 15 analysts and represents a decline in eps of −5.0% over the same quarter last year, when the company reported earnings of $1.51/share.

The revenue forecast of $12.192 billion based on a poll of 12 analysts implies a year-over-year (YoY) decline in revenue of −1.7%. Last year the company reported $12.397 billion in revenue for the quarter.

Expected to report EPS contraction of −5.0% for Q3, 2020
Metric Expected Prior Year YoY Change
Revenue $12,191.86 $12,397.00 −1.7%
EPS $1.43 $1.51 −5.0%

Earnings Call Trends

Management has been great at managing analyst expectations historically. The company has a perfect record over the last 8 tracked quarters of exceeding earnings guidance.

What are your expectations from Merck & Co., Inc. for earnings this quarter? Let us know in the comments!

Analyst Expected vs. Reported EPS
Quarter Expected Reported Surprise Result
Q2, 2020 $1.09 $1.37 25.8% Beat
Q1, 2020 $1.34 $1.50 11.8% Beat
Q4, 2019 $1.15 $1.16 1.2% Beat
Q3, 2019 $1.24 $1.51 21.5% Beat
Q2, 2019 $1.16 $1.30 12.2% Beat
Q1, 2019 $1.05 $1.22 15.8% Beat
Q4, 2018 $1.03 $1.04 0.6% Beat
Q3, 2018 $1.14 $1.19 4.3% Beat

In the following table, we summarize the company’s stock price movements after earnings releases. The “Price Day Prior” column shows the closing stock price on the day before the earnings report, and the “Price Next Day” column shows the stock price at the end of the trading day after the earnings report. After the last earnings report for the period ending June 30, 2020, the stock price reacted by increasing 1.6%.

Stock Price Performance After Earnings
Report Date Price Day Prior Price Next Day Change % Result
July 31, 2020 $78.99 $80.24 1.6% Increase
April 28, 2020 $83.98 $80.77 −3.8% Decline
February 5, 2020 $88.36 $85.68 −3.0% Decline
October 29, 2019 $82.20 $86.22 4.9% Increase

The other question to consider is one of earnings manipulation. There is a lot of pressure on management each quarter to deliver on earnings expectations. The Beneish M-Score is a statistical model that provides some insight into whether the company might be manipulating earnings. With a Beneish M-Score of −2.66, the model suggests that the company is not likely to be an earnings manipulator. A value of −2.66 implies a 0.4% chance of earnings manipulation.

Fundamentals And Technical Analysis

Merck & Co., Inc. is currently trading at $78.27/share, down −0.5% for the day. The company is trading at approximately 84.5% of its 52-week high of $92.64/share. The company’s stock price is down −2.5% since the last earnings report and down −2.8% over the previous week.

The company’s 14 Day Relative Price Index (RSI) of 32.35 suggests the company is trading in technically neutral territory. The RSI is considered overbought when above 70 and oversold when below 30.


NYSE:MRK Stock Price Chart
Source: Finbox

The current share price implies a price-to-earnings (P/E) multiple of 18.89 and a forward P/E multiple of 13.67.

Merck & Co., Inc.’s current share price also implies a price-to-book (P/B) multiple of 7.16. The following table summarizes some other key fundamental ratios:

Data as of October 21, 2020
Metric Value
Last Reported Fiscal Period Key FY2020.Q2
Period End Date June 30, 2020
Stock Price (Current) $78.27
P/E Ratio 18.9x
P/E Ratio (Fwd) 13.7x
PEG Ratio 1.3
Total Debt / Total Capital 13.4%
Levered Free Cash Flow $9.344 billion
EV / EBITDA 11.3x

Finbox

Merck & Co., Inc. is a large-cap stock with a market capitalization of $198 billion and a total enterprise value of $217.8 billion. The company operates in the Healthcare sector and the Pharmaceuticals industry.

Merck & Co., Inc. provides healthcare solutions worldwide. The company offers therapeutic and preventive agents for cardiovascular, type 2 diabetes, chronic hepatitis C virus, HIV-1 infection, intra-abdominal, fungal infection, insomnia, and inflammatory diseases; neuromuscular blocking agents; cholesterol modifying medicines; and anti-bacterial and vaginal contraceptive products. It provides products to prevent chemotherapy-induced and post-operative nausea and vomiting; treat non-small-cell lung, ovarian and breast, esophageal, thyroid, cervical, and brain cancers; and prevent diseases caused by human papillomavirus, as well as vaccines for measles, mumps, rubella, varicella, shingles, rotavirus gastroenteritis, and pneumococcal diseases. In addition, the company offers drugs for hepatocellular and merkel cell carcinoma; antibiotic and anti-inflammatory drugs for infectious and respiratory diseases, fertility disorders, and pneumonia in cattle, bovine, and swine; vaccines for poultry; parasiticides for sea lice in salmon; and antibiotics and vaccines for fish. Further, it provides companion animal products; diabetes mellitus treatment and anthelmintic products for dogs and cats; products to treat fleas, ticks, mosquitoes, and sandflies; horse fertility management products for swine; and dog, cat, and horse vaccines. Additionally, the company offers services and solutions that focus on engagement, clinical, and health analytics. Merck & Co., Inc. has collaborations with AstraZeneca PLC; Bayer AG; Eisai Co., Ltd.; Almac Discovery Ltd.; Skyhawk Therapeutics, Inc.; Ridgeback Biotherapeutics; Shanghai Junshi Biosciences Co., Ltd.; FUJIFILM Corporation; and Intec Pharma Ltd. It serves drug wholesalers and retailers, hospitals, and government agencies; managed health care providers; and physicians and physician distributors, veterinarians, and animal producers. The company was founded in 1891 and is headquartered in Kenilworth, New Jersey.

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.