Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Merck's Earnings Beat Leads the Dow's Bounce

The major U.S. stock indices are all seeing nice bounces as of 2:30 p.m. EDT, with the Dow Jones Industrial Average (DJINDICES: ^DJI  ) gaining more than 96 points. Big Pharma's Merck  (NYSE: MRK  )  has led the Dow's gain by a wide margin on an earnings report that buoyed shareholders' optimism. Meanwhile, IBM  (NYSE: IBM  )  has risen 1.2% on good news of its own, while Sprint (NYSE: S  ) has jumped over 10% on its earnings so far today. Let's catch up on what you need to know.

Merck's earnings: Boom or bust?
Merck's stock has bounced by 3% even though its first-quarter report showed the company's revenue fell 4% year over year and missed analyst estimates. However, the company's cost reductions have come through this quarter, with Merck's adjusted earnings of $0.88 per share topping analyst projections by $0.09. Merck has pushed aggressive cuts to its significant research and development budget recently after investors pointed out that the operations were not reflected in the company's pipeline. Overall, R&D costs dropped by 17% in the most recent quarter.

But are Merck's earnings really all that strong in the long term? While it's good for investors and the company's bottom line that Merck is putting its costs in order, the company's powerhouse animal health segment saw sales fall 3.2% this quarter. However, Merck scored a major victory in the quarter as sales of diabetes drugs Januvia and Janumet combined ticked up by 3%. These two drugs made up around $6 billion in sales last year, and with the patent cliff still impacting older cash cows such as Singulair, Merck will need Januvia and Janumet to turn back to growth for the coming years as the company tries to bring forward a few pipeline hopefuls that could emerge as blockbuster drugs.

Around the Dow today, IBM delighted investors with a $0.15 dividend hike. The 16% increase comes as IBM struggles with profit growth: The company has posted eight-straight months of declining earnings, and sales fell to the lowest point in five years. IBM has turned from tech growth stock to a reliable cash cow with a strong dividend and a mere 26% dividend payout ratio, but it will need to drive growth from areas such as the Internet of Things and the cloud in order to keep earnings on the upswing. Still, IBM's dividend appears in no danger despite those earnings shortfalls.

Meanwhile, Sprint reported a net per-share loss of $0.04 for its most recent quarter, better than the $0.21 per-share loss it reported a year ago. Sprint also boosted its revenue slightly, in line with analyst projections. But despite the gains, all's not well for the third-largest wireless provider in the U.S. Sprint reported that it saw 383,000 net wireless customers abandon the company in the most recent quarter, though it added more than 500,000 tablet customers. Competitors have engaged in a fierce fight for customers in the hotly contested wireless market; while Sprint managing its losses looks fine for the short term, the company will need to do better than just tablet growth if it wants to keep its long-term projection rosy for investors.

Is IBM among the top dividend stocks for the next decade?
The smartest investors know that dividend stocks simply crush their non-dividend paying counterparts over the long term. That's beyond dispute. They also know that a well-constructed dividend portfolio creates wealth steadily, while still allowing you to sleep like a baby. Knowing how valuable such a portfolio might be, our top analysts put together a report on a group of high-yielding stocks that should be in any income investor's portfolio. To see our free report on these stocks, just click here now.

Read/Post Comments (0) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2935205, ~/Articles/ArticleHandler.aspx, 9/1/2015 6:21:45 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Dan Carroll

Dan began writing for the Motley Fool in 2012. He is a health care specialist who also follows the defense industry along with tracking the broader U.S. and international markets.

Today's Market

updated 9 hours ago Sponsored by:
DOW 16,528.03 -114.98 -0.69%
S&P 500 1,972.18 -16.69 -0.84%
NASD 4,776.51 -51.82 -1.07%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

8/31/2015 4:57 PM
^DJI $16528.03 Down -114.98 -0.69%
IBM $147.89 Down -0.09 -0.06%
International Busi… CAPS Rating: ****
MRK $53.85 Down -1.52 -2.75%
Merck & Co., Inc. CAPS Rating: ****
S $5.06 Down -0.13 -2.50%
Sprint CAPS Rating: **