Today's IBD 50 Stocks To Watch pick — Dow Jones leader Merck — is one of the top stocks to watch, as it approaches a fresh buy point despite the ongoing stock market correction. MRK stock climbed nearly 1% in the first half of Tuesday's session.
Dow Jones Stocks To Watch: Merck
On Monday, Merck stock jumped 3.3% after a drug it acquired for billions scored a "must-win" in a study of patients with a rare blood pressure condition.
Evercore ISI analyst Umer Raffat called sotatercept the most critical component of the company's $11.5 billion acquisition of Acceleron Pharma. He also noted it was a "must-win" for Merck.
In the Stellar study, Merck added sotatercept on top of standard treatments for pulmonary arterial hypertension (PAH). PAH is a form of high blood pressure in the lungs and right side of the heart.
The pharmaceutical leader's adjusted Q2 earnings climbed 43% to $1.87 per share while sales rose 28% to $14.59 billion vs. the year-ago period. Q3 earnings are expected to be flat, at $1.75 per share on $14.07 billion in revenue.
That report is due out Oct. 27 before the opening bell.
IBD Stock Ratings
MRK stock shows a solid 93 out of 99 Earnings Per Share Rating and a perfect "A" SMR grade, according to IBD Stock Checkup. The SMR Rating analyzes a company's sales, margins and return on equity, scaling results from "A" (the best) to "E" (the worst).
In 2021, the company's pretax margins and return on equity measured 35% and 48%, respectively. Meanwhile, sales growth for this top Dow Jones stock averaged 30% over the last two quarters.
The stock has a good 95 out of a perfect 99 IBD Composite Rating, ranking it first within the Medical-Ethical Drugs industry group.
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Merck Stock Nears New Buy Point
Merck is building a double bottom with a 93.12 buy point, according to IBD MarketSmith pattern recognition. The relative strength line hit a new high Monday, as the stock decisively regained its key 50-day moving average.
A strong RS line in a weak market environment is a key technical indicator of strength.
Wait for a decisive breakout above the entry before deciding whether to purchase shares.
Remember, with the stock market trend in correction mode, breakouts are more likely to fail and investors should be mostly, if not entirely, on the sidelines.
Still, the stock's unusual strength is notable during the ongoing market weakness, so this Dow Jones leader is one of the top stocks to watch.
Be sure to follow Scott Lehtonen on Twitter at @IBD_SLehtonen for more on top stocks to buy and watch and the stock market.
