Should You Buy, Sell or Hold MRK Stock After Q1 Earnings Beat?

Core Viewpoint - Merck reported strong first-quarter 2025 results, exceeding earnings and sales estimates, driven by Keytruda and new product launches, despite challenges in the HPV vaccine sales in China [1][2][28]. Financial Performance - Adjusted earnings were $2.22 per share, a 12% increase year over year, while revenues reached $15.53 billion, up 1% year over year [1]. - Keytruda generated $7.21 billion in sales, a 6% increase year over year, while Gardasil sales declined by 40% due to lower demand in China [2][14]. - Merck maintained its sales guidance for 2025 in the range of $64.1 billion to $65.6 billion, expecting sales to accelerate in the second half of the year [2][25]. Margin and Guidance Adjustments - Adjusted gross margin guidance was lowered by 50 basis points to 80% due to tariff impacts, with an expected cost of $200 million from tariffs [3]. - Adjusted EPS guidance was revised down from $8.88-$9.03 to $8.82-$8.97, including a one-time charge of 6 cents related to an M&A transaction [3]. Key Products and Pipeline - Keytruda remains a significant driver, accounting for approximately 50% of pharmaceutical sales, with ongoing growth expected from early-stage lung cancer indications [4][5]. - Merck's pipeline has expanded significantly, with plans to launch around 20 new vaccines and drugs, including Capvaxive and Winrevair, which have strong revenue potential [9][10][28]. Strategic Initiatives - Merck is pursuing innovative strategies for Keytruda's growth, including combinations with other therapies and developing a personalized mRNA cancer vaccine in partnership with Moderna [6][12]. - The company has invested $12 billion in U.S. manufacturing since 2018, with an additional $9 billion planned through 2028 to enhance supply chain resilience [26]. Market Position and Challenges - Merck's stock has underperformed compared to the industry and S&P 500, with a 16.1% decline year-to-date [16][19]. - Concerns exist regarding the reliance on Keytruda, especially with its patent expiration in 2028 and increasing competition from other therapies [12][13][28].