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Merck KGaA Beats on Q1 Earnings - Analyst Blog


Merck KGaA (MKGAF) reported first quarter 2014 earnings per American Depositary Receipt (ADR) of $3.17, up 13.6% year over year and ahead of the Zacks Consensus Estimate of $2.35.

Revenues in the reported quarter were $3.6 billion, almost in line with the year-ago quarter. Revenues grew 1.8% organically due to strong performance in the emerging markets. Emerging markets grew organically by 5.6%, mainly driven by the Merck Serono and Merck Millipore divisions.

Segment Sales in Detail

The company operates under four divisions: Merck Serono, Consumer Health Care, Merck Millipore and Performance Materials.

Merck Serono's revenues decreased 1% in the reported quarter due to currency headwinds of 5.2%. Rebif sales grew organically by 5.3%. Oncology drug Erbitux' sales grew organically by 0.5%. Erbitux sales however declined due to a negative foreign exchange impact of 6.1%. Gonal-f sales improved strongly in the reported quarter.

The Consumer Health Care division's revenues decreased 0.8% due to a negative foreign exchange impact of 6.5%. Sales from this segment grew organically by 5.7% primarily driven by Neurobion and Floratil.

The Merck Millipore division's revenues fell 1.8%. Segment sales grew 3.7% organically, which was offset by a negative currency headwind of 5.5%. Organic growth was driven by Process Solutions and Lab Solutions.

The Performance Materials division's revenues declined 4.5% due to currency headwinds of 5.6%. Merck completed the acquisition of AZ Electronic Materials in May 2014, which will be integrated with the Performance Materials division.


For 2014, Merck KGaA expects sales to grow slightly on an organic basis. This will however be impacted by negative foreign exchange effects. Thus, Merck KGaA expects steady sales in the range of € 10.9 billion and € 11.1 billion in 2014. The company expects stable organic growth at Merck Serono, moderate organic growth at Consumer Health, slight organic growth at Performance Materials and moderate organic growth at Merck Millipore.

Merck KGaA carries a Zacks Rank #4 (Sell). Investors looking for better-ranked stocks may consider companies like Allergan (NYSE: AGN), Alexion Pharmaceuticals, Inc. (NASDAQ: ALXN) and Shire (NASDAQ: SHPG). Allergan carries a Zacks Rank #1 (Strong Buy) while Alexion and Shire carry a Zacks Rank #2 (Buy).

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