Merck(US:MRK) ZACKSยท2025-10-28 17:40Core Viewpoint - Merck is set to report its third-quarter 2025 earnings on October 30, with consensus estimates for sales at $17.06 billion and earnings per share (EPS) at $2.36. Earnings estimates for 2025 have slightly declined from $8.94 to $8.92 per share over the past month [1][6]. Earnings Performance - Merck has consistently exceeded earnings expectations in the last four quarters, with an average earnings surprise of 3.92%. The most recent quarter showed a 5.97% surprise [3][4]. Factors Influencing Upcoming Results - After a weak first half, Merck anticipates growth in the second half, driven by oncology drugs like Keytruda, Animal Health, and new products, although this may be partially offset by lower sales of Gardasil in China and Japan [6][7]. Oncology Drug Performance - Keytruda is expected to drive significant sales growth, with consensus estimates for its sales at $8.4 billion, while internal estimates are slightly higher at $8.51 billion. The drug's sales are bolstered by its uptake in earlier-stage indications and continued momentum in metastatic indications [8][9]. Vaccine and Other Drug Performance - Sales of Gardasil are projected to decline due to reduced demand in China and Japan, with consensus estimates at $1.75 billion, while internal estimates are at $1.70 billion. Other vaccines have also seen declining sales [11][12]. - The diabetes franchise is facing challenges from lower demand and generic competition, impacting sales of Januvia/Janumet [14]. New Product Contributions - New drugs like Winrevair and Capvaxive are contributing to sales growth, with Winrevair showing strong demand in the U.S. market and Capvaxive gaining traction in retail pharmacies [15][24]. Financial Performance and Valuation - Merck's stock has underperformed the industry and the S&P 500, with a year-to-date loss of 11.5% compared to a 5.7% increase for the industry. However, the company's valuation appears attractive, trading at a forward P/E ratio of 9.42, lower than the industry average of 15.58 [17][20]. Investment Thesis - Merck has a robust portfolio with over six blockbuster drugs, primarily driven by Keytruda. The company has also expanded its pipeline significantly, with plans to launch around 20 new vaccines and drugs in the coming years [23][24]. - Despite concerns about dependency on Keytruda and challenges in the non-oncology business, Merck's strong revenue generation from its existing products supports a long-term investment perspective [26][29].