Merck & Co. Inc. (MRK) is set to report second-quarter 2014 results on Jul 29, 2014 before the market opens. Last quarter, it had posted a positive surprise of 11.39%. Let’s see how things are shaping up for this announcement.
Factors to Consider This Quarter
Merck’s top line is facing significant pressure due to strong generic competition for several products including Singulair. Moreover, Januvia’s performance has been lagging expectations. Januvia is facing rebate and pricing pressure due to the entry of new products in the diabetes market.
Meanwhile, cost-cutting efforts and the performance of Remicade, Simponi and Isentress should help in offsetting the impact of genericization.
Earnings Whispers?
Our proven model does not conclusively show that Merck is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #1, 2 or 3 for this to happen. That is not the case here, as you will see below.
Zacks ESP: Earnings ESP represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate. Merck’s Most Accurate estimate stands at 81 cents while the Zacks Consensus Estimate is 82 cents. Hence, the difference stands at -1.22% for the company.
Zacks Rank: Merck’s Zacks Rank #3 (Hold), when combined with a negative ESP, makes surprise prediction difficult.
We caution against stocks with Zacks #4 and #5 Ranks (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Other Stocks to Consider
Here are some companies you may want to consider as our model shows that they have the right combination of elements.
Teva Pharmaceutical Industries Ltd. (TEVA) has an earnings ESP of +6.67% and carries a Zacks Rank #2. It is expected to report second-quarter results on Jul 31 before market opens.
Endo International (ENDP) has an earnings ESP of +1.11% and carries a Zacks Rank #2. Endo will report second quarter earnings on Jul 31 before market opens.
Impax Laboratories (IPXL) has an earnings ESP of +26.83% and holds a Zacks Rank #3. Impax will report second quarter earnings on Aug 6 before market opens.
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