Merck Sets Low Earnings Bar for Pfizer

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The drug patent cliff for Big Pharma is coming with some continued consequences, and two drug giants with earnings this week are Dow Jones Industrial Average components. Merck & Co. (NYSE: MRK) reported earnings on Monday morning and the result has put a weight on its shares. The report was also soft enough that the earnings bar should now be artificially lowered for Pfizer Inc. (NYSE: PFE) when it reports earnings on Tuesday morning before the open.

Merck posted $0.02 in earnings per share (EPS) on sales of $11.03 billion. Estimates were $0.88 EPS, down from $0.95 EPS a year ago. Revenue was expected to be $11.12 billion, but that was already expected to be a 3% decline from a year ago.

Merck shares have reacted negatively with a drop of 2.5% down to $45.40 in early afternoon trading. Pfizer shares are actually trading up after Merck’s bad earnings report, but we still think this sets the bar rather low.

Pfizer’s earnings are expected to be $0.56 EPS versus $0.53 EPS a year ago. Revenue is expected to be down about 9% to $12.7 billion. This may be reflective of a spin-off, but the patent cliff woes are present in many giant pharmaceuticals. Pfizer’s stock price is up 0.5% at $30.75, its 52-week high is $31.15, and the consensus analyst price target is $31.91.

Merck now trades at just over 13-times expected 2013 earnings per share estimates versus a ratio of just over 14-times for Pfizer.