Most press covering Merck
Today, Merck announced 2002 earnings per share of $3.14, flat with 2001, on a 9% rise in consolidated sales. The better news is that management increased earnings guidance for 2003 to $3.40 to $3.47 per share, representing 10% net income growth. Double-digit earnings growth in its core pharmaceutical business is anticipated.
At $53 per share, the second-largest U.S. pharmaceutical company trades at 16.8 times trailing earnings and 15.3 times 2003 estimates. Its $120 billion market value is 17 times free cash flow for October 2001 to October 2002. The stock is flat with prices of five years ago, and yields 2.8%.
One reason Merck remains discounted to peers such as Pfizer
The company's pipeline continues to be less robust than investors like, but a wave of new products is scheduled to launch by 2005 and after (at least, as well as can be scheduled), and should help offset Zocor's losses. Three new drugs may launch this year, and existing drugs continue to grow sales. Singulair, for asthma, grew sales 19% last year to $1.5 billion. The market is much larger. Vioxx, for arthritis, grew sales 8% to $2.5 billion. Higher hopes remain for the drug.
Merck plans to spin off its Medco prescription business this year, which accounts for $30 billion of its $50 billion in annual sales. What's left is pharmaceutical sales, which have grown from $14.2 billion in 1997 to $21.4 billion in 2002, about an 8% compound annual growth rate. Merck is working hard to keep that growth rate, and thus keep its valuation.