Merck Earnings Look Very Mixed in Major Restructuring

Merck & Co. Inc. (NYSE: MRK) reported its third-quarter results Monday morning as $0.90 in earnings per share and $10.6 billion in revenue. That was against Thomson Reuters consensus earnings estimates of $0.88 per share on $10.67 billion in revenue. In the third quarter of the previous year, Merck posted earnings of $0.92 per share and revenue of $11.03 billion.

The company gave guidance for the 2014 full year of $3.46 to $3.50 in earnings per share and $42.4 billion to $42.8 billion in revenue. The consensus estimates for the full year are $3.47 in earnings per share and $42.55 billion in revenue.

Net income for the third quarter was $2.6 billion, compared to $2.7 billion in the same quarter in the previous year. The drop in net income is attributed to large costs tied to acquisitions and divestitures.

The FDA approved Keytruda for the treatment of advanced melanoma in patients who have progressed after other therapies, as well as Belsomra for the treatment of insomnia. Keytruda received breakthrough therapy designation from the FDA for patients with advanced non-small cell lung cancer who have progressed following platinum-containing chemotherapy.

Merck reported increased sales in its Acute Care, Immunology, Diabetes and Animal Health Products segments.

In August, Merck completed its acquisition of Idenix Pharmaceuticals to expand its portfolio of investigational therapies for hepatitis C.

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Kenneth Frazier, Chairman and CEO of Merck, said:

Last October, we launched a multi-year initiative to transform Merck and build a platform for sustained, future growth. One year later, we delivered solid third-quarter results and are making steady progress in our transformation, including divesting non-core assets, reducing our expense base and investing in our promising new product launches and pipeline.

Jefferies reiterated a Hold rating for Merck, but lowered its price target to $60.00 from $62.00, on October 13.

Shares of Merck closed Friday up 1.7% at $57.61. Following the release of the earnings report, the initial reaction in the premarket was positive and shares were up about 0.5% to $58.00.

The stock has a consensus analyst price target of $63.30 and a 52-week trading range of $44.62 to $61.33. The company has a market cap of $166 billion.