MT Insider: Barclays Cuts Merck to Equal Weight With $50 Price Target; Sees Top-Line Pressure on Core Businesses


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Barclays today cut its investment rating for Merck & Co. ( MRK ) to Equal Weight from Overweight, citing increasing pressure on the drug-maker's core businesses.

In particular, the analyst called out potential downside for the company's Januvia medication for Type 2 Diabetes.

According to the report, recent changes in market dynamics and pipeline setbacks will negatively impact revenues for MRK through 2015. Key brands such as Januvia/Janumet, Victrelis, and Isentress are unlikely to deliver expected sales owing to increasing competition.

Moreover, share repurchase and cost-cutting initiatives are not enough to prevent downside to earnings. As a result, Barclays is trimming its sales and earnings forecasts and lowering its price target by $10 to $50 a share.

Specifically, the analyst believes MRK's stock buybacks are unlikely to provide much support to EPS beyond anti-dilution. While the company's recently announced cost-cutting program is projected to save MRK $1.5 billion in 2015, that will only partially offset the sales shortfall.

The analyst's price target of $50 is based on 14.5x 2013 estimated earnings per share.

MRK 46.64 -0.65 -1.37

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Copyright (C) 2014 All rights reserved. Unauthorized reproduction is strictly prohibited.

This article appears in: Investing , Commodities

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