It is a great time to own Merck (NYSE:MRK) right now, and if you don't already, it may be a good time to buy some as a little profit-taking seems to be in progress. The company just announced some dazzling numbers for the quarter, beating expectations and giving investors quite a bit to look forward to, if it all comes out as planned. Sure, the picture isn't universally rosy, but there's going to be a lot to like going forward.
A Spectacular Estimate-Beating Quarter
The numbers for Merck were, indeed, dazzling; pre-market trading saw the share price up fully two percent, though that's retracted a bit as trading starts. Net income for the quarter came in at $2.94 billion, around $1.16 per share. That's well up from this time last year, where the company posted income of $1.9 billion, representing about $0.74 per share. Overall revenue also handily beat projections, coming in at $12.55 billion against projections of $12.26 billion. Earnings per share came out to $1.74 per share, which was nicely superior to a consensus from Zacks, which was expecting just $1.44 per share to come out of the gate.
Leading the way were prescription drug sales, which delivered impressive numbers on just about every front. The company's current flagship, Keytruda, pulled in almost a third of the $11.32 billion total by itself with $3.72 billion in sales. That's more than 21% higher than what was seen this time last year. Similar, if not so spectacular, gains were also seen from the diabetes pills Januvia and Janumet, which brought in an extra 1% to total $1.33 billion. The Pneumovax 23 vaccine for pneumonia was up 58%, bringing in $375 million, as users found the threat of pneumonia connected to COVID-19 to be sufficiently substantial to merit extra protection.
All of this together was enough to see Merck hike its full-year profit forecast to between $5.91 and $6.01 per share, a very nice hike from the original projection of $5.63 to $5.78 per share.
Analysts Taking a Few Downsides in Stride
The biggest downside the company had to mention was the pandemic, which was set to deliver about $2.35 billion in damage due to lost sales and the like. That period where going to a hospital for anything but COVID-related issues and possibly lost limbs hurt many medical supply operations, and Merck was no exception. With that point mostly passed, at least for now, more normal operations are reasserting themselves accordingly.
Meanwhile, the analyst picture is surprisingly rosy. It's not quite what it was six months ago, but in some ways it's actually improved, based on our latest research. Six months ago, Merck had four “hold” ratings and 13 “buy” ratings for a consensus of “buy.” Now, the company has only 12 “buy” ratings, but also only two “hold” ratings, which makes for an actually stronger consensus rating of “buy”. The price target has been ramping up as well; six months ago, it sat at $93 even, but now, it's up to $95.14. Such projections certainly weren't hurt by action this month, as JPMorgan Chase & Co. upgraded the price target from $98 to $105, and Truist launched coverage as a buy at $96.
A Company Gaining Ground
Selling medications into a market like the one we have now, with plenty of aging boomers looking to take the edges off some of their age-related conditions, makes for a good market. Better yet, Merck is actively looking for ways to better sell its product. Reports note that the company got together with Volansi, a drone technology / logistics firm, to set up an aerial drone-delivery system for its prescriptions. The program is still very limited-scale right now—the Federal Aviation Administration only recently got out of the way on this even in part—but right now, the program calls for drone delivery from Merck's manufacturing operations to patients at Vidant Healthplex-Wilson. A far cry from drugs to your door, but everything has a starting point.
Basically, calling Merck a buy right now is almost a foregone conclusion. The company has an extensive and impressive product line of established medications that are doing great things every day. The company also has solid sales of these drugs, and is even looking to the future to help preserve its lead. A company that's doing well today is one thing, but a company that's actively planning to do well tomorrow is one worth investing in. There's a lot to like at Merck, and getting in now should prove ultimately worthwhile.
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