7 Sep

Behind Merck’s Revenues in 2Q17

WRITTEN BY Mike Benson

Merck’s 2Q17 performance

Merck (MRK) reported 1% revenue growth and reached $9.93 billion in 2Q17, compared with $9.84 billion in 2Q16, driven by 2% operational growth but offset by -1% impact of foreign exchange. Analysts estimate a 0.1% decline in revenues to ~$10.5 billion in 3Q17.

Behind Merck’s Revenues in 2Q17

Merck reported EPS (earnings per share) of $1.01 for 2Q17, and analysts estimate EPS of $1.03 for 3Q17.

MRK’s revenues

Merck’s revenues showed an operational increase of 2% to $9.93 billion in 2Q17, driven by strong performances from Keytruda, Gardasil products, Proquad-Varivax, and companion animal health products.

MRK’s profit margins

Merck’s gross margin improved to 77.6% in 2Q17, which represents 14% growth over 2Q16, due to the lower cost of goods sold. Its net profit margin rose 7.4% to 19.6% in 2Q17, compared with 12.2% in 2Q16.

Merck’s profit margin improved on lower inventory write-offs, lower operating expenses, and lower selling, general, and administrative expenses as a percentage of revenues, but these were partially offset by an increase in research and development expenses.

For 3Q17, Wall Street analysts’ estimate a gross margin of 75.9% for Merck, compared with 75.3% in 3Q16. Its net profit margin is estimated to be 6.2% in 3Q17.

To divest company-specific risks, investors can consider ETFs like the Vanguard Health Care ETF (VHT), which has 4.9% of its total assets in Merck (MRK). VHT also has 10.1% in Johnson & Johnson (JNJ), 2.7% in Bristol-Myers Squibb (BMY), and 2.3% in Eli Lilly (LLY).

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