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Analyzing Merck & Co.’s Revenue Estimates in 4Q16

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Jan. 31 2017, Updated 9:09 a.m. ET

Merck’s revenue estimates  

Analysts expect Merck & Co.’s (MRK) revenues for 4Q16 to be ~$10,216 million—nearly flat compared to revenues of $10,215 million in 4Q15. Its 4Q16 revenues are expected to have positive operational growth. The growth will be offset by the negative impact of currencies. On an annual basis, the estimates show a marginal increase of ~1.1% in revenues at $39.92 billion for 2016—compared to a fall of 6.5% in 2015 revenues.

The above chart shows actual revenues and analysts’ estimate for 4Q16. Merck classifies its products into two business segments—human health (pharmaceuticals) and animal health.

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Human health  

The global human health segment generates the most revenue. It contributes nearly 90% of Merck’s total revenues. The segment includes various franchise like oncology, vaccines, hospital acute care, diabetes, other primary care, and women’s health.

The pharmaceuticals segment has a few blockbuster drugs with a yearly contribution of over $1 billion each. These drugs include Januvia, Janumet, Zetia, Vytorin, Remicade, Isentress, Gardasil, Proquad/Varivax, and Cubicin. The revenue growth for 4Q16 is expected to be driven by blockbuster drugs including Januvia, Janumet, the Gardasil vaccine, and the new drug Keytruda. The growth will be partially offset by lower revenues from Remicade and Vytorin.

Animal health  

The animal health segment contributes nearly 8% of Merck’s total revenues. For 4Q16, the segment’s revenue growth is expected to be driven by increased revenues from companion animal products including Bravecto and new aqua and swine products.

To divest the risk, investors can consider ETFs like the iShares S&P Global Healthcare ETF (IXJ). IXJ holds 4.3% of its total assets in Merck, 2.5% in AbbVie (ABBV), 5.0% in Pfizer (PFE), and 2.5% in Gilead Sciences (GILD).

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