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With a market cap of $258 billion, Merck & Co., Inc. (MRK) is a global healthcare company, operating in the pharmaceutical and animal health sectors. Based in Rahway, New Jersey, Merck develops various human and animal health products, including blockbuster drugs like Keytruda and vaccines like Gardasil.
Shares of the pharmaceutical company have significantly underperformed the broader market over the past 52 weeks. MRK has declined 2.1% over this time, while the broader S&P 500 Index ($SPX) has rallied 31.3%. In 2024, shares of MRK are down 7.2%, compared to SPX’s nearly 20% gain on a YTD basis.
Focusing more closely, Merck & Co. has also lagged behind the Health Care Select Sector SPDR Fund's (XLV) 15.4% returns over the past 52 weeks and a 7.8% YTD gain.
Merck & Co. has underperformed due to looming market exclusivity loss for its top-selling drug, Keytruda, along with rising competition from new treatments in oncology. In addition, recent price cuts for Januvia under Medicare and a one-time acquisition-related charge impacting operating margins have further pressured Merck's stock performance.
Moreover, despite reporting better-than-expected Q3 adjusted earnings of $1.57 per share and revenue of $16.7 billion, shares of MRK fell 2.4% on Oct. 31 due to weaker-than-anticipated Gardasil sales, particularly from declining demand in China. Additionally, investors were concerned about the significant 75% year-over-year rise in R&D expenses due to recent acquisitions, which pressured Merck’s cost structure. Lastly, Merck’s lowered full-year EPS guidance, factoring in one-time transaction costs and ongoing foreign exchange headwinds, further dampened investor sentiment.
For the current fiscal year, ending in December, analysts expect MRK’s EPS to grow 413.3% year-over-year to $7.75. The company's earnings surprise history is promising. It topped the consensus estimates in all of the last four quarters.
Among the 26 analysts covering the stock, the consensus rating is a “Strong Buy.” That’s based on 23 “Strong Buy” ratings and three “Holds.”
On Nov. 1, Morgan Stanley analyst Terence Flynn reduced Merck's price target to $123, maintaining an “Equal-Weight” rating due to uncertainties surrounding Gardasil and the China market as Merck heads into 2024.
The mean price target of $138.88 represents a premium of 37.2% to PARA's current levels. The Street-high price target of $168, implies a potential upside of nearly 66% from the current price levels.
On the date of publication, Sohini Mondal did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
