Merck (MRK) to Report Q3 Earnings: What's in the Cards?

Merck MRK will report third-quarter 2022 results on Oct 27 before market open. In the last reported quarter, the company delivered an earnings surprise of 18.23%.

The large drugmaker’s performance beat earnings expectations in each of the trailing four quarters. The company delivered a four-quarter earnings surprise of 16.79%, on average.

Merck & Co., Inc. Price, Consensus and EPS Surprise

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

Merck’s stock has risen 24.8% this year so far against a decrease of 1.5% for the industry.

Image Source: Zacks Investment Research

Factors to Consider

Increased demand for cancer drugs and the HPV vaccine and higher sales of Animal health products are likely to have boosted sales growth in the third quarter like several previous quarters.

In oncology drugs, Keytruda sales are likely to have been driven by continued strong momentum in metastatic indicationsand rapid uptake across recent earlier-stage launches. The Zacks Consensus Estimate for Keytruda’s sales is $5.41 billion.

Higher alliance revenues from Lynparza, driven by continued uptake across multiple approved indications globally, may have boosted oncology sales. Please note that Merck markets Lynparza in partnership with AstraZeneca AZN.

AstraZeneca and Merck formed a profit-sharing deal to co-market Lynparza and Koselugo in July 2017.

AstraZeneca and Merck’s Lynparza is approved for four cancer types, 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 due to recovery in surgical procedures and an increase in market share may have benefitedsales of neuromuscular blockade medicine — Bridion injection. The Zacks Consensus Estimate for Bridion is $392 million, while our estimate is $377.3 million.

Merck and partner Ridgeback Biotherapeutics’ oral antiviral pill to treat COVID-19, Lagevrio (molnupiravir) is not likely to have been a major contributor of top-line growth in the third quarter like the first two quarters of the year. Based on the supply and purchase agreements in place, Merck expected Lagevrio to generate $5 billion to $5.5 billion in revenues in 2022 of which $5.01 is already recorded in the first half of 2022. The Zacks Consensus Estimate as well as our estimate for Lagevrio is $300 million.

With regard to the HPV vaccine, Gardasil, ex-U.S. sales are expected to have been driven by strong demand in China and increased supply in the third quarter. The unfavorable timing of CDC purchasing, which hurt U.S. sales in the second quarter, is likely to have reversed in the third quarter. The Zacks Consensus Estimate for Gardasil is $$2.09 billion while our estimate is $2.0 billion.

Meanwhile, the top line is expected to have witnessed the impact of loss of U.S. market exclusivity for drugs like Remicade, Noxafil and Zetia. Continued pricing pressure and possible generic competition in international markets like China and Europe may have hurt sales of the diabetes franchise (Januvia/Janumet).

The Animal Health franchise should continue to see strong sales growth. The Zacks Consensus Estimate for the Animal Health unit is $1.48 billion, while our estimate is $1.46 billion.

Earnings Whispers

Our proven model does not conclusively predict an earnings beat for Merck 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 -1.04% as the Zacks Consensus Estimate of $1.69 per share is higher than the Most Accurate Estimate of $1.67 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 #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Stocks to Consider

Here are some drug stocks that have the right combination of elements to beat on earnings this time around:

Eli Lilly LLY has an Earnings ESP of +0.58% and a Zacks Rank #3.

Lilly’s stock has risen 23.4% this year so far. Lilly missed earnings estimates in three of the last four quarters. Lilly has a negative four-quarter earnings surprise of 5.11%, on average. LLY is scheduled to release its third-quarter 2022 results on Nov 1.

BioMarin Pharmaceutical BMRN has an Earnings ESP of +10.77% and a Zacks Rank of 2.

BioMarin’s stock has risen 1.9% this year so far. BioMarin beat estimates in each of the last four quarters, delivering an earnings surprise of 98.90%. BioMarin is set to report earnings on Oct 26 after the closing bell.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.