Merck is set to report its Q1 2024 results, with expectations of posting revenue of $15.2 billion and adjusted earnings of $1.97, slightly higher than street estimates. Keytruda will continue to be the main driver of growth for Merck, with quarterly sales estimated to be around $7 billion. The HPV vaccine Gardasil is also expected to see sales rise in the mid-teens. Despite expectations of a positive Q1, analysts believe that Merck’s stock is appropriately priced at around $130 per share.
Merck’s stock performance has seen strong gains over the past three years, rising 55% from early 2021 to its current level of $125. However, the stock’s performance has been inconsistent, with underperformance in 2021 and 2023 compared to the S&P 500. Other heavyweights in the Health Care sector and megacap stars have also faced challenges in consistently beating the market. The Trefis High Quality Portfolio, on the other hand, has outperformed the S&P 500 each year over the same period, suggesting more stable returns with less risk.
In the current uncertain macroeconomic environment, with high oil prices and elevated interest rates, there is speculation on whether Merck could underperform the S&P 500 in the next 12 months. From a valuation perspective, Merck looks appropriately priced with an estimated valuation of $134 per share. In the previous quarter, Merck saw revenue growth of 6% y-o-y, driven by higher sales of Keytruda and Gardasil. Keytruda sales surged 20% y-o-y, while Gardasil saw a significant 35% rise. The company expects full-year revenue for 2024 to be in the range of $62.7 billion to $64.2 billion.
Keytruda and Gardasil continue to be the key growth drivers for Merck in the latest quarter, with Keytruda receiving five new U.S. FDA approvals since October. Gardasil is experiencing strong demand in China, while the company faces generic competition for its diabetes drugs in Europe. Investors will be watching closely to see how Merck’s operating margin trends in Q1, especially since management has indicated a potential expansion in this metric for 2024. While MRK stock appears reasonably priced, comparisons to its peers will provide further insight into how Merck is performing relative to others in the industry.
