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Dow Jones News: Walmart Under Pressure From Amazon; Merck Trounces Analyst Estimates

By Timothy Green - Oct 29, 2019 at 1:59PM

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The online grocery business gets more competitive, and strong drug sales drive double-digit growth for Merck.

The Dow Jones Industrial Average (^DJI -0.50%) was struggling to hold onto a small gain Tuesday afternoon, up just 0.09% at 1:10 p.m. EDT. Walmart (WMT 0.11%) stock was moving against the tide, stumbling as Amazon (AMZN -1.85%) eliminated fees for its online grocery delivery service. Meanwhile, shares of Merck (MRK 0.50%) were solidly higher following a strong earnings report.

Walmart faces a more aggressive Amazon

Shares of megaretailer Walmart were down 1.1% after rival Amazon announced that it was getting rid of the monthly fee tied to its Amazon Fresh grocery delivery service. Online grocery sales are one of the pillars of Walmart's e-commerce strategy, helping to drive the company's impressive online sales growth. Walmart is squarely in the crosshairs as Amazon guns for a greater portion of the online grocery market.

A Walmart employee loading purchases into a car

Image source: Walmart.

Previously, Amazon Fresh was available to Prime members in certain metropolitan markets for a $14.99 monthly fee. That fee was on top of the monthly or annual fee for Prime, making Amazon Fresh a decidedly premium service.

Amazon Fresh will now be included in the Prime membership with no additional fee. Orders over a minimum order threshold will be eligible for free two-hour delivery for Prime members, and faster delivery options will be available for additional fees.

Walmart plans to have grocery delivery available from 1,600 stores by the end of the year. The company offers one-off grocery deliveries for a fixed fee, as well as unlimited deliveries through an annual subscription. The company's main focus, though, has been online grocery pickup, which is on pace to be available at 3,100 stores by the end of 2019. Walmart's grocery pickup service comes with no additional fees.

Amazon is ramping up the pressure on Walmart with this move, but the company may not have much of a choice. Even after shelling out billions for Whole Foods, Amazon continues to trail Walmart badly in the online grocery business. Walmart is the online grocery market leader in the U.S. by a wide margin, according to data from Second Measure, thanks to its aggressive expansion of its pickup and delivery services.

Making Amazon Fresh free for Prime members should boost usage, but it certainly won't help Amazon's bottom line. Whether it puts a dent in Walmart's online grocery business remains to be seen.

Merck reports solid third-quarter results

Solid third-quarter results from pharmaceutical giant Merck drove the stock 4.3% higher on Tuesday. Both revenue and earnings handily beat analyst expectations, driven by strong sales of key drugs like Keytruda and Gardasil.

Total revenue was $12.4 billion for Merck in the third quarter, up 15% year over year and $810 million higher than analysts were expecting. Sales of Keytruda contributed $3.1 billion of revenue, up 62% year over year, while sales of Gardasil rose 26% to $1.3 billion. Overall, pharmaceutical sales jumped 15% to $11.1 billion.

The bottom line grew substantially as well, with non-GAAP (adjusted) earnings per share rising 27% to $1.51. That number trounced analyst estimates by $0.27. "We achieved another quarter of strong revenue and earnings growth as we continue to realize the benefits of our sustained investment in research and development and our focus on commercial execution," said Merck CEO Kenneth Frazier, in prepared remarks included in the earnings release.

For the full year, Merck expects revenue between $46.5 billion and $47.0 billion, and adjusted EPS between $5.12 and $5.17.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Timothy Green has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Merck & Co., Inc. Stock Quote
Merck & Co., Inc.
MRK
$91.04 (0.50%) $0.45
Wal-Mart Stores, Inc. Stock Quote
Wal-Mart Stores, Inc.
WMT
$139.52 (0.11%) $0.15
Amazon.com, Inc. Stock Quote
Amazon.com, Inc.
AMZN
$142.10 (-1.85%) $-2.68
Dow Jones Industrial Average (Price Return) Stock Quote
Dow Jones Industrial Average (Price Return)
^DJI
$33,980.32 (-0.50%) $-171.69

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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