Merck or AbbVie: Which Has More Robust Margins?


Jan. 15 2019, Updated 9:00 a.m. ET

Margin guidance

On its third-quarter earnings conference call, Merck & Co. (MRK) forecast an expansion in its operating margin in the coming years, mainly driven by growth in its oncology business, a favorable product mix, and rapid revenue growth. The company also expects its effective tax rate for 2018 to fall in the range of 19%–20%. In its third-quarter earnings conference presentation, it also forecast a 1% YoY contraction in its product gross margin for 2018.

Article continues below advertisement

According to its third-quarter earnings conference call, AbbVie (ABBV) expects its adjusted gross margin to be more than 80.5%, while its adjusted operating margin is expected to be close to 45%. The company also expects its operating margin to be close to 50% in 2020. AbbVie expects its gross margin to be 170–180 basis points higher YoY (year-over-year) in 2018 driven by the termination of certain Humira royalties paid by the company.

Margin projections

Wall Street analysts expect Merck & Co.’s gross margins to be 75.43%, 75.89%, and 76.39%, respectively, in 2018, 2019, and 2020. On the other hand, AbbVie is expected to report gross margins of 80.77%, 82.33%, and 81.70%, respectively, in 2018, 2019, and 2020.

Wall Street analysts also expect Merck & Co.’s adjusted net income margins to be 27.53%, 27.63%, and 28.54%, respectively, in 2018, 2019, and 2020. On the other hand, AbbVie is expected to report adjusted net income margins of 37.59%, 38.95%, and 40.04%, respectively, in the same years.

AbbVie is thus expected to report higher gross margins and net income margins than Merck & Co. in each year from 2018 to 2020.

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


More From Market Realist

  • SemiLEDS logo over LED lighting
    Company & Industry Overviews
    There's Still Time to Get in on SemiLEDS (LEDS) Stock
  • Trader on the NYSE
    Company & Industry Overviews
    What Are the Most Expensive Stocks Ever?
  • Michelob Ultra beer
    Company & Industry Overviews
    AB InBev Is the Top Beer Brand Worldwide—Is It a Monopoly?
  • Businesswoman looking out a window
    Company & Industry Overviews
    Shifting Focus: Three Women Investing Funds in 2021
  • CONNECT with Market Realist
  • Link to Facebook
  • Link to Twitter
  • Link to Instagram
  • Link to Email Subscribe
Market Realist Logo
Do Not Sell My Personal Information

© Copyright 2021 Market Realist. Market Realist is a registered trademark. All Rights Reserved. People may receive compensation for some links to products and services on this website. Offers may be subject to change without notice.