Merck Sets Low Earnings Bar for Pfizer

The drug patent cliff for Big Pharma is coming with some continued consequences, and two drug giants with earnings this week are Dow Jones Industrial Average components. Merck & Co. (NYSE: MRK) reported earnings on Monday morning and the result has put a weight on its shares. The report was also soft enough that the earnings bar should now be artificially lowered for Pfizer Inc. (NYSE: PFE) when it reports earnings on Tuesday morning before the open.

Merck posted $0.02 in earnings per share (EPS) on sales of $11.03 billion. Estimates were $0.88 EPS, down from $0.95 EPS a year ago. Revenue was expected to be $11.12 billion, but that was already expected to be a 3% decline from a year ago.

Merck shares have reacted negatively with a drop of 2.5% down to $45.40 in early afternoon trading. Pfizer shares are actually trading up after Merck’s bad earnings report, but we still think this sets the bar rather low.

Pfizer’s earnings are expected to be $0.56 EPS versus $0.53 EPS a year ago. Revenue is expected to be down about 9% to $12.7 billion. This may be reflective of a spin-off, but the patent cliff woes are present in many giant pharmaceuticals. Pfizer’s stock price is up 0.5% at $30.75, its 52-week high is $31.15, and the consensus analyst price target is $31.91.

Merck now trades at just over 13-times expected 2013 earnings per share estimates versus a ratio of just over 14-times for Pfizer.