Merck Discussing Another Drugmaker Buyout -- Buy Or Sell?

NYSE: MRK | Merck & Co. Inc. News, Ratings, and Charts

MRK – Merck & Co., Inc. (MRK) reported solid first-quarter results beating analysts’ estimates for sales and earnings. In addition, given that the company is in talks to acquire another biotech firm to boost its cancer-drug portfolio, would it be wise to buy the stock now? Let’s discuss…

Merck & Co., Inc. (MRK) provides health solutions through prescription medications, vaccines, biological treatments, and consumer care products. The company operates in two segments: pharmaceutical and animal health. The stock has gained 17% over the past year and 23.8% over the past nine months to close its last trading session at $92.00.

Currently, the company is in talks to acquire cancer-focused biotech firm Seagen Inc. (SGEN), which has a market capitalization of $30.46 billion, to enhance its cancer-drug portfolio. This would be one of the largest takeovers of the year.

Also, before considering the Seagen deal, Merck completed the acquisition of Acceleron Pharma Inc. (XLRN) last November for $11.5 billion.

MRK reported $15.9 billion in sales for the first quarter of 2022, beating the consensus estimate of $14.6 billion. The company posted an adjusted EPS of $2.14, beating Wall Street’s estimate by 17.1%.

MRK’s chief executive officer and president, Robert M. Davis, said, “Robust first-quarter performance was driven by significant clinical advancements in our research pipeline and effective commercial execution across a broad set of key growth drivers.”

Here is what could shape MRK’s performance in the near term:

Latest Developments

Recently, MRK announced today that the U.S. Centers for Disease Control and Prevention’s (CDC’s) Advisory Committee on Immunization Practices (ACIP) unanimously voted to include VAXNEUVANCETM (Pneumococcal 15-valent Conjugate Vaccine) as a recommended option for vaccination in infants and children, including routine use in children under two years of age.

Recently, MRK announced that the Phase 3 PROpel trial results have been published in NEJM Evidence. Results from the trial showed that LYNPARZA in combination with abiraterone plus prednisone significantly improved radiographic progression-free survival (rPFS) versus abiraterone plus prednisone, a standard of care, as first-line treatment for patients with metastatic castration-resistant prostate cancer (mCRPC) with or without homologous recombination repair (HRR) gene mutations.

Robust Financials

MRK’s sales increased 50% year-over-year to $15.90 billion during the first quarter of fiscal 2022. Its non-GAAP net income grew 84% from its year-ago value to $5.43 billion, while its non-GAAP EPS improved 84% from its prior-year quarter to $2.14. The company’s net cash provided by operating activities of continuing operations grew 284% year-over-year to $4.76 billion.

Strong Profitability

MRK’s 71.12% trailing-12-month gross profit margin is 29.2% higher than the 55.04% industry average. In addition, its trailing-12-month EBITDA margin of 40.52% is 927.54% higher than the 3.94% industry average. Also, its 0.55% trailing-12-month asset turnover ratio is 55.2% higher than its industry average of 0.35%.

Impressive Growth Prospects

The Street expects MRK’s revenues to rise 21.8% in the current quarter and 18.8% in the current year. The EPS is expected to rise 29.8% In the current quarter, 21.9% in the current year, and 0.5% next year.

In addition, MRK EPS is expected to rise at an 11.6% CAGR over the next five years. Furthermore, the company has an impressive earnings surprise history; it topped the Street’s EPS estimates in three of the trailing four quarters.

Consensus Rating and Price Target Indicate Potential Upside

Out of the 10 Wall Street analysts that rated MRK, seven rated it Buy, and three rated it hold. The 12-month median price target of $98.20 indicates a 6.7% potential upside. The price targets range from a low of $87.00 to a high of $107.00.

POWR Ratings Reflect Solid Prospects

MRK has an overall A grade, which equates to Strong Buy in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. MRK has an A grade for Growth and a B for Stability and Quality. MRK’s strong financials and impressive growth attributes are consistent with the Growth grade. 

Its stock beta of 0.37 is in sync with the Stability grade. In addition, its higher profitability justifies the Quality grade.

Among the 169 stocks in the F-rated Medical – Pharmaceuticals industry, MRK is ranked #1.

Beyond what I stated above, we have graded MRK for Sentiment, Value, and Momentum. Get all MRK ratings here.

Bottom Line

MRK has gained 21.5% over the past six months. The company has surpassed the analysts’ sales and EPS projections in its recent quarterly release, raising investors’ optimism about its prospects. Moreover, various clinical advancements have helped the company exhibit strong first-quarter sales.

Given the stock’s higher profitability and lower valuations, we think it could be an opportune time for investors to scoop up its shares.

How does Merck & Co., Inc. (MRK) Stack Up Against its Peers?

MRK has an overall POWR Rating of A, which equates to a Strong Buy. Check out these other stocks within the Medical – Pharmaceuticals industry with A (Strong Buy) ratings: Novartis AG (NVS), Novo Nordisk A/S (NVO), and Pfizer Inc. (PFE).


MRK shares were trading at $93.41 per share on Friday afternoon, up $1.41 (+1.53%). Year-to-date, MRK has gained 23.97%, versus a -17.77% rise in the benchmark S&P 500 index during the same period.


About the Author: Spandan Khandelwal


Spandan's is a financial journalist and investment analyst focused on the stock market. With her ability to interpret financial data, she aims to help investors evaluate the fundamentals of a company before investing. More...


More Resources for the Stocks in this Article

TickerPOWR RatingIndustry RankRank in Industry
MRKGet RatingGet RatingGet Rating
NVSGet RatingGet RatingGet Rating
NVOGet RatingGet RatingGet Rating
PFEGet RatingGet RatingGet Rating

Most Popular Stories on StockNews.com


:  |  News, Ratings, and Charts

Recession or Not Recession…That Is the Question

Every investor appreciates that recessions and bear markets go hand in hand. But the definition of a recession often seems more difficult to pin down. So are we in a recession? And if not, then does that mean that disaster has been averted or that the pain train is still rolling towards investors? This is an important debate because it helps us appreciate what lies ahead for the stock market (SPY). We will tackle this vital topic in this week's commentary. Read on below...

:  |  News, Ratings, and Charts

3 Active Stocks on Wall Street to Buy Right Now

Even though the U.S. stocks ended July with decent gains, growing recession fears could keep the stock market under pressure in the near term. However, despite the current market headwinds, it could be wise to invest in fundamentally sound stocks, Microsoft (MSFT), SIGA Technologies (SIGA), and Fortinet (FTNT), which have been active on Wall Street lately. Read on to learn more…

:  |  News, Ratings, and Charts

4 Big Reasons Why the Bear Rally Is Nearing an End…

The Stock Market (SPY) has put on an impressive rally over the last few weeks, leading many investors to believe that the bull is ready to resume its run. However, there are multiple reasons to believe the bear market is far from over. I lay out 4 of the main reasons below and explain how you can profit from the volatile markets that lie ahead. Read on below for more…

:  |  News, Ratings, and Charts

2 Winning Stocks to Pay Attention to This Week

Concerns over soaring inflation, the Fed’s aggressive interest rate hikes, the decline in GDP for two consecutive quarters, and a potential recession are expected to keep the stock market under pressure in the near term. Fundamentally sound and winning stocks Murphy USA (MUSA) and JAKKS Pacific (JAKK) could be good additions to your watchlist as investors prepare for a busy week of inflation data. Let’s discuss…

:  |  News, Ratings, and Charts

4 Big Reasons Why the Bear Rally Is Nearing an End…

The Stock Market (SPY) has put on an impressive rally over the last few weeks, leading many investors to believe that the bull is ready to resume its run. However, there are multiple reasons to believe the bear market is far from over. I lay out 4 of the main reasons below and explain how you can profit from the volatile markets that lie ahead. Read on below for more…

Read More Stories

More Merck & Co. Inc. (MRK) News View All

Event/Date Symbol News Detail Start Price End Price Change POWR Rating
Loading, please wait...
View All MRK News