Do Merck and Pfizer Earnings Signal a Pullback in Health Care?

Health and Healthcare

Published: October 27, 2020 10:49 am

Merck & Co. Inc. (NYSE: MRK) and Pfizer Inc. (NYSE: PFE) reported their most recent quarterly results before the opening bell Tuesday. Although markets seem to be pulling back from their highs, investors were not thrilled about this quarter for these two pharmaceutical giants.

Although Pfizer was recently released from the Dow Jones industrial average, many still look to it and Merck as bellwethers for the pharma industry. Even though COVID-19 has proven relatively favorable for the Health Care sector, a hiccup from these two companies and a recent pullback in the broad markets seems to only yield more uncertainty.

When Pfizer reported its third-quarter results, the drugmaker posted adjusted diluted earnings per share (EPS) of $0.72 on revenues of $12.1 billion. In the same period a year ago, the company reported EPS of $0.75 on revenues of $12.68 billion. Quarterly results also compare to the consensus estimates for EPS of $0.75 and $12.33 billion in revenues.

For the latest quarter, the company saw 4% operational growth from its biopharma segment. Separately, Upjohn saw an 18% operational decline.

As for 2020 full-year guidance, the company expects to see EPS in the range of $2.88 to $2.93 and revenue between $48.8 billion and $49.5 billion. Consensus estimates are calling for $2.90 in EPS and $49.34 billion in revenue for the full year.

For its third quarter, Merck said that it had $1.74 in EPS and $12.6 billion in revenue, which compared with consensus estimates of $1.43 in EPS and $12.17 billion in revenue. The same period of last year reportedly had $1.51 in EPS and $12.4 billion in revenue.

Third-quarter pharmaceutical sales increased 2% to $11.32 billion, while, excluding foreign exchange, sales grew 2%. The increase was driven primarily by growth in oncology and certain hospital acute care products, partially offset by the negative impact of the COVID-19 pandemic and the ongoing impacts of the loss of market exclusivity for several products.

Animal Health sales totaled $1.2 billion for the first quarter of 2020, an increase of 9% compared with the third quarter of 2019. Excluding the unfavorable effect from foreign exchange, Animal Health sales grew 12%.

For the 2020 full year, the company expects to see EPS in the range of $5.91 to $6.01 and revenue between $47.6 billion and $48.6 billion. Consensus estimates are calling for $5.71 in EPS and $48.0 billion in revenue for the year.

Pfizer stock traded down 1% to $37.32 Tuesday, in a 52-week range of $27.88 to $40.97. Its consensus price target is $41.33. Merck stock traded relatively flat at $79.17. Its 52-week range is $65.25 to $92.64, and the consensus price target is $95.50.

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