Merck (NYSE: MRK) released an unusual earnings announcement. It is profitable, has a bright future, and will fire about 13,000 people. These employees can leave with the knowledge that they have helped the big pharma company further improve its margins.
Merck’s revenue for the second quarter of the year was $12.2 billion up from $11.3 billion in the same period last year. Net income rose to $2 billion from $.72 billion. When restructuring and tax considerations were backed out, non-GAAP net was $3 billion up from $2.7 billion in Q2 2010. Merck made a lot of money by either measurement.
Merck’s merger with Schering-Plough has already borne a great deal of cost savings success. The “Merger Restructuring Program”, as the company is fond of calling it will eventually reduce expenses by $4 billion to $4.6 billion. Merck will lower its work force by 12% to 13% as a part of the process.
One of the things Wall St. wanted to know is whether all of the restructuring will hurt sales progress. The answer was that it will not. The company raised the lower end of its 2011 non-GAAP EPS range and is now targeting a range of $3.68 to $3.76 and a 2011 GAAP EPS target range of $1.95 to $2.17.
Merck wants to do its part to help the economy. It will dump thousands of people into an environment in which chronic unemployment is already a problem that continues to cripple the US recovery. Merck can take some satisfaction in that.
Douglas A. McIntyre
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