Here’s What To Expect From Merck’s Q4

MRK: Merck logo

Merck (NYSE: MRK) is scheduled to report its Q4 2022 results on Thursday, February 2. We expect MRK stock to trade sideways, with its revenue likely falling slightly below and earnings marginally above the street estimates. Although the company should benefit from continued market share gains for Keytruda and Gardasil, among other products, forex headwinds may weigh on its overall performance. Furthermore, we find MRK stock to have little room for growth, as discussed below. Our interactive dashboard analysis on Merck’s Earnings Preview has additional details.

(1) Revenues expected to be slightly below the consensus estimates

  • Trefis estimates Merck’s Q4 2022 revenues to be $13.5 billion, reflecting no growth y-o-y and slightly below the $13.7 billion consensus estimate.
  • Market share gains will likely continue to drive revenue growth for Keytruda and Gardasil.
  • Looking at Q3 2022, Merck reported revenue of $15.0 billion, reflecting a significant 14% y-o-y growth, partly due to a $436 million sales contribution from its Covid-19 treatment – Lagevrio.
  • Merck’s top-selling drug – Keytruda – saw its sales rise 20% to $5.4 billion in Q3, while Gardasil sales were up 15% to $2.3 billion.
  • Our dashboard on Merck Revenues offers details on the company’s segments.
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(2) EPS expected to be marginally above the consensus estimates

  • Merck’s Q4 2022 adjusted earnings per share (EPS) is expected to be $1.54 per Trefis analysis, just a cent above the consensus estimate of $1.53.
  • Merck’s adjusted net income of $4.7 billion in Q3 2022 reflected a 4% rise from its $4.5 billion figure in the prior-year quarter, led by higher revenues, partly offset by higher R&D expenses.
  • For the full year 2023, we expect the adjusted EPS to be higher at $7.58, compared to $6.02 in 2021 and an estimated $7.40 in 2022.

(3) MRK stock has little room for growth

  • We estimate Merck’s Valuation to be $114 per share, which is only 8% above the current market price of $105.
  • This represents a forward P/E multiple of 14x based on our EPS forecast of $7.58 in 2023, slightly higher than the last three-year average of 13x, implying that MRK stock is appropriately priced.
  • However, if the company reports upbeat results, along with the 2023 guidance better than the street estimates, the P/E multiple will likely be revised upward, resulting in higher levels for MRK stock.

While MRK stock looks reasonably priced, it is helpful to see how Merck’s Peers fare on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.

Furthermore, the Covid-19 crisis has created many pricing discontinuities which can offer attractive trading opportunities. For example, you’ll be surprised at how counter-intuitive the stock valuation is for Xylem vs. Merck.

Despite inflation rising and the Fed raising interest rates, Merck stock has risen 25% this year. But can it drop from here? See how low Merck stock can go by comparing its decline in previous market crashes. Here is a performance summary of all stocks in previous market crashes.

What if you’re looking for a more balanced portfolio instead? Our high-quality portfolio and multi-strategy portfolio have beaten the market consistently since the end of 2016.

Returns Jan 2023
MTD [1]
YTD [1]
Total [2]
 MRK Return -5% -5% 79%
 S&P 500 Return 6% 6% 82%
 Trefis Multi-Strategy Portfolio 11% 11% 249%

[1] Month-to-date and year-to-date as of 1/30/2023
[2] Cumulative total returns since the end of 2016

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