Merck Reports Mixed Q4: Beats Revenue, Short on EPS Expectations
Despite falling short of anticipated non-GAAP EPS at $1.72, Merck's revenue exceeded expectations.
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Merck & Co., Inc. (NYSE: MRK) reported a robust performance for the fourth quarter of 2024, with worldwide sales reaching $15.6 billion, marking a 7% increase from the same period in 2023. This growth was even more pronounced when excluding the impact of foreign exchange, showing a 9% increase. Key drivers for this growth included the impressive performance of its oncology portfolio, particularly KEYTRUDA, which saw a 19% increase in sales to $7.8 billion.
This was driven by strong global demand across various cancer indications, including bladder and endometrial cancers, as well as non-small cell lung cancer. The company’s non-GAAP earnings per share (EPS) for the quarter stood at $1.72, while GAAP EPS was slightly lower at $1.48. These figures included a $0.23 per share charge related to business development transactions. Despite the charge, the non-GAAP EPS showed significant improvement compared to the previous year’s fourth quarter, reflecting Merck’s operational strength and strategic business decisions.
Merck’s animal health division also contributed positively to the quarterly results, with sales increasing by 9% to $1.4 billion. This growth was primarily driven by higher pricing and demand for livestock products, as well as the acquisition of the Elanco aqua business. The company’s new product, WINREVAIR, launched in the second quarter, continued to see strong uptake, contributing $200 million in sales for the quarter.
Merck & Co., Inc. Reports Mixed Results for Fourth Quarter 2024
When compared against market expectations, Merck’s fourth-quarter results were a mixed bag. The company reported non-GAAP EPS of $1.72, which fell short of the anticipated $1.81. However, it exceeded revenue expectations, with actual sales of $15.6 billion compared to the forecasted $15.47 billion. The earnings miss can largely be attributed to the $0.23 per share charge related to business development transactions, which impacted the bottom line.
Despite the earnings shortfall, Merck’s revenue performance was commendable, driven by its oncology and animal health segments. KEYTRUDA, in particular, outperformed expectations, with sales climbing 19% year-over-year, underscoring the strength of its oncology portfolio. However, the decline in sales for GARDASIL/GARDASIL 9, primarily due to reduced demand in China, was a notable downside, impacting overall vaccine sales.
The company’s operational efficiency was evident in its improved gross margins, both on GAAP and non-GAAP bases, compared to the previous year. This was achieved through a favorable product mix and lower royalty rates for KEYTRUDA and GARDASIL/GARDASIL 9, partially offset by higher amortization of intangible assets. The strategic focus on high-demand areas and effective cost management helped Merck navigate the challenges posed by foreign exchange fluctuations and competitive pressures.
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Merck Expects Worldwide Sales in $64.1 billion to $65.6 billion Range for Full Year 2025
Merck provided a positive financial outlook for the full year 2025. The company anticipates worldwide sales to be in the range of $64.1 billion to $65.6 billion. This guidance reflects a cautious approach, taking into account a temporary pause in shipments of GARDASIL/GARDASIL 9 to China from February 2025 through mid-year.
Despite this, the company remains optimistic about its growth prospects, driven by continued demand for its oncology and animal health products.Merck expects its non-GAAP EPS for 2025 to range between $8.88 and $9.03, which includes a $0.09 per share charge related to a milestone payment to LaNova.
The company has factored in a negative impact of approximately $0.35 per share due to foreign exchange rates. The guidance suggests confidence in overcoming the challenges posed by currency fluctuations and competitive dynamics in key markets.
Disclaimer: The author does not hold or have a position in any securities discussed in the article. All stock prices were quoted at the time of writing.
Tim Fries
Tim Fries is the cofounder of The Tokenist. He has a B. Sc. in Mechanical Engineering from the University of Michigan, and an MBA from the University of Chicago Booth School of Business. Tim served as a Senior Associate on the investment team at RW Baird's US Private Equity division, and is also the co-founder of Protective Technologies Capital, an investment firm specializing in sensing, protection and control solutions.
