Why Merck Will Move the Dow Tomorrow

Dow earnings are slowing down, but the season isn't over yet. Find out how Merck will respond to Pfizer's big deal.

Apr 28, 2014 at 4:30PM

The Dow Jones Industrials (DJINDICES:^DJI) climbed 87 points on Monday, as investors were relieved not to have seen some of their immediate geopolitical fears pan out over the weekend. Part of the excitement in today's market action came from Dow component Pfizer (NYSE:PFE) and a possible $100 billion Big Pharma megamerger with the U.K.'s AstraZeneca. That clearly has implications for rival Merck (NYSE:MRK), which reports its first-quarter earnings tomorrow morning. With Merck's stock having risen dramatically this year, the big question is whether it can keep executing well on the drug-development front and stand up to larger competition -- especially if an M&A deal at Pfizer raises the stakes even further.

Merck will report its results before the market opens tomorrow, with its earnings release expected at around 7 a.m. EDT based on the timing of releases in past quarters. The company has scheduled its earnings conference call to begin at 8 a.m. EDT.

Mrk Vaccine

Source: Merck.

Merck is expected to see revenue and net income fall from year-ago levels, continuing a trend resulting from the loss of patent protection on blockbuster asthma drug Singulair. The large patent cliff that Merck, Pfizer, and several other pharmaceutical giants have faced is a big reason why mergers and acquisitions activity in the pharma industry has picked up so strongly, as bigger players seek the rights to promising pipeline candidates from up-and-coming drug developers. As the price tags for potential deals grow higher, competition for the best blockbuster prospects becomes even fiercer.

Still, Merck has retained some strong-selling drugs in its stable of approved treatments, with Januvia and Janumet claiming a big share of the rising diabetes treatment market. Merck has also pushed heavily into cancer research and has promising treatments for hepatitis C that could eventually unseat some of the industry's leaders in fighting that disease.


Source: Steven Depolo, Flickr.

Even as it presses for growth, though, Merck also must stay aware of threats to areas in which it has traditionally dominated. If a Pfizer-AstraZeneca merger goes through, or if another pharma company steps into the mix and makes a rival bid of its own, then ever-larger competitors will have more resources to conduct research and tap lucrative drug markets. In the long run, Merck might need to respond with more extensive partnerships of its own in order to keep up the pace.

For Dow investors, Merck's relatively low share price doesn't give the stock a huge amount of direct influence over the index. But with several health-care stocks within the Dow, Merck's trends could give insight that will affect the whole sector, and that could well be enough for Merck to move the entire Dow on Tuesday.

Invest in the next wave of health-care innovation
The Economist compares this disruptive invention to the steam engine and the printing press. Business Insider says it's "the next trillion dollar industry." And the technology  behind is poised to set off one of the most remarkable health care revolutions in decades. The Motley Fool's exclusive research presentation dives into this technology's true potential, and it's ability to make life-changing medical solutions never thought possible.  To learn how you can invest in this unbelievable new technology, click here now to see our free report.

Dan Caplinger has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at www.fool.com/podcasts.

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to www.fool.com/podcasts, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.


Compare Brokers