Merck's 1Q Adjusted Profit beats, But Revenue Miss, Narrows Adjusted EPS FY16 Forecast

Merck & Co., Inc.

reported 18% increase in net income to $1.13 billion in the first quarter from $958 million in the year-ago quarter. Similarly, its earnings advanced 21% to $0.40 a share from $0.33 a share in the corresponding quarter of the last year. Excluding special items, Merck would have reported 2.6% growth in net income to $2.49 billion from $2.43 billion while earnings would have increased 4.7% to $0.89 a share from $0.85 a share in the comparable period. This was $0.04 a share more than the Street analysts' expectations. The company's top line fell 1% to $9.312 billion from $9.425 billion in the previous year quarter, which was lower than the Street analysts' expectations of $9.46 billion. Merck's Chairman and CEO, Kenneth Frazier, reacted to say that "Our first quarter's performance sets us on a good course for the year. We remain focused on advancing our pipeline and driving the commercial success of our key launches and inline medicines and vaccines." He added that "Business development is a top priority, and we are actively pursuing the best external science through licensing or bolt-on acquisitions to bolster our pipeline and grow our company." Robert Davis, its CFO, also commented that "We demonstrated strong performance with a leveraged P&L, growing sales and EPS, excluding the impact of foreign exchange. We benefited from the contribution of new product launches, while continuing to sustain growth in our key franchises and driving operational improvements across the company." The company's President for Research Laboratories, Roger Perlmutter, felt that "Merck Research Laboratories advanced several clinical development programs in the first quarter of 2016. We continued to accelerate the development of KEYTRUDA with an additional supplemental filing in head and neck cancer, and by securing a fourth Breakthrough Therapy Designation in classical Hodgkin lymphoma." Going forward, Merck said that it expects GAAP earnings to be $1.96 - $2.23 a share for the year 2016. However, the company narrowed and boosted its adjusted earnings to be $3.65 - $3.77 a share. The company expects its revenues to be $39.0 - $40.2 billion for the full year. Street analysts expect $3.71 a share on revenues of $39.58 billion. In the pre-market trading on Thursday, the stock advanced 0.8%.