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Merck or AbbVie: Which Has a Stronger Earnings Trajectory?

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Jan. 15 2019, Updated 7:31 a.m. ET

Earnings guidance

During its third-quarter earnings conference presentation, Merck & Co. (MRK) announced a change in its non-GAAP (generally accepted accounting principles) EPS forecast range for 2018 from $4.22–$4.30 to $4.30–$4.36. The midpoint of its forecast EPS range increased from $4.26 to $4.33.

According to its investor presentation, Merck & Co. expects its non-GAAP EPS to rise YoY (year-over-year) by 8%–9% on a reported basis and by 9%–10% excluding the impact of foreign currency fluctuations in 2018. According to the company’s third-quarter earnings conference call, it also expects a 1% negative impact on its non-GAAP EPS due to foreign exchange at mid-October rates.

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According to its third-quarter earnings conference call, AbbVie (ABBV) expects its adjusted EPS to fall in the range of $7.90–$7.92 for 2018, a YoY rise of 41.3% at the midpoint. The company has also projected adjusted EPS of $1.89–$1.91 for the fourth quarter of 2018, a YoY rise of 28% at the midpoint. This estimate, however, excludes the impact of noncash amortization and other one-time events worth $0.26 per share.

Wall Street estimates

Wall Street analysts expect Merck & Co.’s non-GAAP EPS to be $4.34, $4.71, and $5.28, respectively, in 2018, 2019, and 2020, implying YoY rises of 9.10%, 8.43%, and 12.18%.

On the other hand, Wall Street analysts expect AbbVie’s non-GAAP EPS to be $7.95, $8.72, and $9.56, respectively, in 2018, 2019, and 2020, implying YoY rises of 42.00%, 9.63%, and 9.64%.

Compared to Merck & Co., AbbVie is expected to report higher absolute non-GAAP EPS in every year from 2018 to 2020. However, Merck & Co.’s EPS growth rate from 2018 to 2020 is expected to slightly surpass AbbVie’s in the same timeframe.

In the next article, we’ll compare the margins of Merck & Co. and AbbVie in greater detail.

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