Merck & Co. Inc.
) is set to announce its second quarter 2012 results on July 27,
2012, before the opening bell. The Zacks Consensus Estimate for the
second quarter is $1.01 per share, 6.3% above the year-ago earnings
of 95 cents.
First Quarter Recap
Merck reported first quarter 2012 earnings per share (excluding
special items) of 99 cents, a penny above the Zacks Consensus
Estimate and 7.6% above year-ago earnings.
Revenues for the quarter increased 1.3% to $11,731 million, just
shy of the Zacks Consensus Estimate of $11,746 million. While
currency fluctuations negatively impacted sales by 1%, the
arbitration settlement agreement with
Johnson & Johnson
) had a negative impact of 2% on sales.
(Read our detailed discussion on the first quarter earnings
Merck Beats by a Penny; Affirms View
Agreement of Estimate Revisions
Over the past 30 days, there have been significant estimate
revisions for the second quarter of 2012. While 4 analysts have
upped their estimates, 5 have moved in the opposite direction.
In contrast, fiscal 2012 estimates have witnessed a strong upward
bias over the last 30 days with 9 analysts raising estimates and 1
trimming the same.
Fiscal 2013 earnings estimates have been upped by 12 analysts over
the last 30 days with 2 downward movements.
The last 7 days saw 1 analyst slashing earnings estimates for the
second quarter of 2012, while 1 moved in the opposite direction.
For fiscal 2012, a sole analyst trimmed the estimates.
We believe that concerns regarding the upcoming Singulair patent
expiry (August 2012) has led analysts to revise their estimates
downward for the second quarter of 2012. Singulair, indicated for
the chronic treatment of asthma and relief of symptoms of allergic
rhinitis, recorded $5.5 billion in sales in 2011. The product
accounted for approximately 11.4% of total revenues in 2011.
Meanwhile, the upward revisions in 2012 estimates reflect the
impact of the amendment of Merck's agreement with
). As per the amended agreement, AstraZeneca will not exercise its
option to repurchase Merck's interests in Prilosec and Nexium in
the US in 2012.
Merck had expected that AstraZeneca would exercise its option in
2012. Therefore, the amendment of the deal is a positive for Merck
and is expected to add approximately $200 million to Merck's
revenues and approximately 3 - 5 cents per share to its 2012
ASTRAZENECA PLC (AZN): Free Stock Analysis
JOHNSON & JOHNS (JNJ): Free Stock Analysis
MERCK & CO INC (MRK): Free Stock Analysis
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Magnitude of Estimate Revisions
The Zacks Consensus Estimate for the second quarter of 2012
decreased a penny to $1.01 per share in the last 30 days. The Zacks
Consensus Estimate for 2012 went up by a cent to $3.83 per share in
the past 30 days, which is towards the higher end of the earnings
guidance range of $3.75 - $3.85 per share provided by the company.
Both second quarter and fiscal 2012 estimates remained stationary
in the last 7 days.
Merck has surpassed earnings estimates in three of the last four
quarters and reported in-line with expectations in the second
quarter of 2011. The company recorded a maximum positive surprise
of 3.30% in the third quarter of 2011. On an average, the earnings
surprise was 2.49 %.
We currently have a Neutral recommendation on Merck, which carries
a Zacks #2 Rank (short-term Buy rating).