Merck & Co. Inc. ( MRK ) is set to announce its first quarter 2012 results on April 27, 2012, before the opening bell. The Zacks Consensus Earnings Estimate for the first quarter is 97 cents per share (with an upside potential of 2.06%) on revenues of $11.75 billion. In the year-ago quarter, Amgen recorded earnings per share of 92 cents, while sales came in at $11.58 billion.
Fourth Quarter Recap
Merck reported fourth quarter 2011 earnings per share (excluding special items) of 97 cents per share, a couple of cents above the Zacks Consensus Estimate and 10.2% above the year-ago earnings.
Revenues for the quarter increased 1.7% to $12.3 billion, just shy of the Zacks Consensus Estimate of $12.5 billion. Including one-time items, Merck swung to a profit of $0.49 per share from the year-ago loss of $0.17. The company reported full-year earnings of $3.77 per share, a penny above Zacks Consensus Estimate and 10.2% above the year-ago earnings.
Agreement of Estimate Revisions
Estimate revisions for Merck have been non-existent over the past month with none of the 14 analysts covering Merck for the first quarter of 2012 revising estimates. We believe that most analysts are remaining on the sidelines prior to the earnings release and will adjust their estimates only after Merck discloses its results.
Fiscal 2012 estimates too have been left untouched by the majority of the analysts following the company for the year. Only 4 analysts have revised 2012 estimates, with 3 upping estimates and 1 moving in the opposite direction.
Magnitude of Estimate Revisions
Estimates for the first quarter of 2012 have remained static at 97 cents per share over the last 30 days due to the absence of estimate revisions by the analysts following the stock. Estimates for fiscal 2012 too have remained static at $3.80 per share over the last 30 days with the upward revisions balancing the downward ones.
Merck exhibited a positive earnings surprise trend in three of the last four quarters. The company reported in line earnings in the second quarter of 2011. The maximum positive surprise of 9.52% was witnessed in the first quarter of 2011. On an average, the earnings surprise was 4.98%.
Neutral on Merck
We currently have a Neutral recommendation on Merck in the long-run. Merck carries a Zacks #3 Rank (Hold rating) in the short-run. The company is currently facing issues such as EU pricing pressure, the Remicade/Simponi transition and pipeline setbacks.
With Merck transferring the exclusive marketing rights for Remicade and Simponi to Johnson & Johnson ( JNJ ), the combined sales of both drugs fell 24% in the final quarter of 2011.
The loss of patent exclusivity of Singulair in the US and EU in August 2012 and February 2013 respectively, is expected to result in significant loss of revenues at Merck. We believe the company will continue resorting to cost-cutting initiatives to drive the bottom-line. Meanwhile, some of Merck's recent launches should start contributing significantly to the top line in the forthcoming quarters.