), a global pharmaceutical and chemical enterprise, reported
second-quarter 2014 results earlier this week and confirmed the
full year sales guidance provided earlier.
The company's second-quarter 2014 earnings per American
Depositary Receipt (ADR) came in at $1.52, down 1.8% from the
Revenues declined 0.9% year over year to $3.8 billion mainly due
to lower royalty, license and commission income and unfavorable
impact of currency fluctuation.
All growth rates mentioned below are on a year-over-year and
local currency basis.
Segment Sales in Detail
The company operates in four divisions: Merck Serono, Consumer
Health Care, Merck Millipore and Performance Materials.
In the reported quarter, Merck Serono's revenues decreased 1.4%
due to currency headwinds of 4.4%. Rebif sales declined 7% with a
fall of 2.8% in organic sales, mainly due to competitive pressure
in North America and Europe. However, oncology drug Erbitux's sales
increased 6.5% with organic growth of 11.3%. Gonal-f and thyroid
disorder products sales increased during this quarter. This segment
performed well in emerging markets with organic sales growth of
The Consumer Health Care division's revenues increased 3.3%.
Sales from this segment grew organically by 8.5% primarily driven
by Neurobion, Floratil and Femibion as well as local brands in
Germany. In emerging markets, the Consumer Health Care division
grew 14.2% organically.
The Merck Millipore division's sales grew 4% organically, which
was offset by a negative currency headwind of 4.2%. Organic growth
was driven by Process Solutions, Lab Solutions and Bioscience
The Performance Materials division's revenues increased 17.3%
mainly driven by the May 2014 acquisition of AZ Electronic
Materials. This division grew organically by 1.8%.
2014 Outlook Maintained
Merck KGaA continues to expect sales to grow slightly on an
organic basis in 2014. However, this growth will be offset by
negative foreign exchange effects. Merck KGaA maintains sales
guidance in the range of € 10.9 billion − € 11.1 billion for 2014.
Merck KGaA expects earnings per share in the range of € 4.50 - €
4.75 based on the share split, effective since Jun 30, 2014.
The company expects slight organic growth at Merck Serono,
moderate organic growth at Consumer Health, slight organic growth
at Performance Materials and moderate organic growth at Merck
While all the four divisions of Merck KGaA performed
satisfactorily in the quarter, we are particularly pleased with the
performance of the Consumer Health Care division which reflected
the highest percentage of growth organically. We are encouraged by
Merck KGaA's acquisition of AZ Electronic Materials and remain
positive on its impact on the top-line for the coming quarters.
Investors looking for well-positioned stocks in the health care
sector may consider Endo International plc (
), United Therapeutics Corporation (
) and Anacor Pharmaceuticals, Inc. (
). While Endo and United Therapeutics carry a Zacks Rank #1 (Strong
Buy), Anacor holds a Zacks Rank #2 (Buy).
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