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Valued at a market cap of $226.1 billion, Merck & Co., Inc. (MRK) is a healthcare company that boasts more than six blockbuster drugs in its portfolio, with PD-L1 inhibitor Keytruda approved for several types of cancer. The Rahway, New Jersey-based company offers human health pharmaceutical products in the areas of oncology, hospital acute care, immunology, neuroscience, virology, cardiovascular, and diabetes.
Companies worth $200 billion or more are generally described as “mega-cap” stocks, and MRK fits right into that category. This healthcare giant is one of the world's largest pharmaceutical companies, with blockbuster products including cancer immunotherapy, anti-diabetic medications, and vaccines for HPV and chickenpox. It is known for delivering innovative health solutions through its prescription medicines, vaccines, biological therapies, and animal health products.
Despite its strengths, the company has declined 32.7% from its 52-week high of $134.63, achieved on Jun. 25, 2024. Moreover, it has fallen 12.2% over the past three months, lagging behind the broader S&P 500 Index’s ($SPX) 2.3% decrease over the same time frame.
Additionally, in the longer term, MRK has declined 29.8% over the past 52 weeks, significantly lagging behind SPX’s 15.4% returns. Shares of MRK are down nearly 22.3% on a six-month basis, massively underperforming SPX’s 4.2% gains over the same time frame.
To confirm its bearish trend, Merck has been trading below its 200-day moving average since late July and has remained below its 50-day moving average since late June 2024.
On Feb. 4, shares of Merck tumbled 9.1% following its Q4 earnings release, despite reporting better-than-expected adjusted earnings of $1.72 per share and revenues of $15.6 billion.
A key positive was the significant improvement in net income, as the bottom line rose from $0.03 per share in the year-ago quarter. The upside was on account of a one-time charge incurred by the company in the year-ago quarter for a collaboration with Daiichi Sankyo. Additionally, revenue grew 7% year-over-year, driven by strong demand for Keytruda and other oncology drugs.
However, what weighed on investor sentiment was Merck’s fiscal 2025 outlook, which fell short of expectations. The company projects full-year revenue between $64.1 billion and $65.6 billion, with sales expected to be negatively impacted by its decision to temporarily halt shipments of Gardasil vaccines to China due to economic weakness and sluggish consumer demand in the region.
MRK’s underperformance becomes more evident when compared to its rival, Bristol-Myers Squibb Company (BMY), which gained 16.4% over the past 52 weeks and 22.2% over six months.
Despite Merck’s recent underperformance, analysts remain moderately optimistic about its prospects. The stock has a consensus rating of “Moderate Buy” from the 23 analysts covering it, and the mean price target of $111.90 suggests a modest 23.5% premium to its current levels.
On the date of publication, Neharika Jain did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
