Merck's profit guidance for 2023 widely missed Wall Street's projections on Thursday, leading Merck stock to crumble despite a quarterly beat.
For the year, the pharmaceutical behemoth expects adjusted earnings of $6.80-$6.95 per share — far below expectations for $7.33, according to FactSet. The guidance could be lower due to a $1.4 billion charge in connection with a recent acquisition, Edward Jones analyst John Boylan said in a note to clients. Also as a result, Merck's full-year tax rate is expected to climb by 1%.
Merck expects sales to be $57.2 billion to $58.7 billion, in line with Wall Street calls for $57.94 billion.
"We view the (charge) as a one-time noncash item that should not impact Merck's cash-generation ability," he said. "The higher tax rate may also be only a one-year phenomenon. We view the remainder of the guidance as appropriately conservative in this volatile economic environment."
Still, on today's stock market, Merck stock toppled 3.3%, ending the regular session at 103.46.
Merck Stock: Two Key Products Miss
Overall, Merck's fourth-quarter metrics topped expectations. Sales climbed 2% to $13.83 billion, above views for $13.66 billion. Adjusted profit dipped 10% to $1.62 a share, but came in north of calls for $1.53. In constant currency, sales grew 8% and earnings sank 7%.
On a bearish note, sales of Merck's bread-and-butter cancer blockbuster Keytruda were light at $5.45 billion. Merck stock analysts called for $5.51 billion. Sales of human papillomavirus vaccine Gardasil were also short at $1.47 billion vs. views for $1.6 billion. Keytruda sales ramped up 19% on a strict, as-reported basis, while Gardasil sales fell 4%. In constant currency, sales rose a respective 26% and 6%.
Edward Jones' Boylan notes the Keytruda and Gardasil misses could contribute to the dive for Merck stock.
"However, we also believe that one quarter does not make a trend, and that we didn't see anything which would cause us to rethink our positive outlook for these products for the foreseeable future," he said.
Merck stock recent slid below its 50-day moving average, according to MarketSmith.com. Still, shares have a strong IBD Digital Composite Rating of 91 out of a total 99. This puts shares in the top 9% of all stocks in terms of fundamental and technical measures.
Follow Allison Gatlin on Twitter at @IBD_AGatlin.
