Leerink Partners Reiterates Market Perform on Merck (MRK) Following 3Q EPS Beat
Leerink Partners reiterated a Market Perform rating and $67.00 price target on Merck (NYSE: MRK) following the company's 3Q earnings results. MRK reported a $0.04 EPS beat. US sales of Januvia/Janumet increased by 22%, but was benefited by ~$100M due to the timing of consumer buying that is expected to negatively impact future quarters.
Analyst Seamus Fernandez commented, "Following MRK's solid 3Q results, which beat consensus and our EPS by $0.04 & $0.07, respectively, we are updating our model to reflect better overall OpEx mgmt. and updated 2015 guidance. We are not making any changes to our 2016+ forecast or valuation at this time. 3Q EPS upside was driven by lower-than-expected R&D spend, which came in at $1.5B, $137M below our estimates. Global revenue was $10.1B, in line with our & Street forecasts. The company raised FY adjusted EPS guidance to be in the range of $3.55 to $3.60 on a nonGAAP basis vs. previous $3.45 to $3.55 (including negative impact from FX, but excluding certain items). Guidance for total sales was increased to $39.2 to $39.8B vs. previous $38.6 to $39.8B. We have updated 4Q and FY 2015 numbers in our model and maintain our MP rating and $67 valuation. MRK's stock appears cheap on a relative basis, but prospects for the near-term high-risk pipeline look dim (anacetrapib for CV disease, odanacatib for osteoporosis), the durability of the HCV market remains a question, and the competitive IO landscape is intense."
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Shares of Merck closed at $53.47 yesterday.