Merck 2025 Q1 Earnings Strong Performance as Net Income Rises 6.7%

Merck, ranked 48th by market capitalization, reported its fiscal 2025 Q1 earnings on May 2nd, 2025. The company posted revenue of $15.53 billion, slightly missing consensus estimates of $15.31 billion, while adjusted earnings per share of $2.22 exceeded expectations of $2.14. The outlook for 2025 sales remains unchanged at $64.1 billion to $65.6 billion, but adjusted earnings per share guidance has been lowered due to tariff-related impacts. Despite challenges with Gardasil demand in China, Keytruda sales continued to drive growth.

Revenue

Merck's total revenue for Q1 2025 decreased by 1.6% to $15.53 billion compared to $15.78 billion in the same quarter last year. The pharmaceutical segment generated $13.64 billion, with oncology at $8.03 billion driven by Keytruda's impressive $7.21 billion contribution. Alliance revenues included Lynparza at $312 million and Lenvima at $258 million. The vaccines segment reached $2.47 billion, with Gardasil/Gardasil 9 sales at $1.33 billion. Hospital and specialty sales were $1.11 billion, while animal health revenue amounted to $1.59 billion. Other revenues totaled $303 million.

Earnings/Net Income

Merck's earnings per share increased by 6.9% to $2.01 in Q1 2025 from $1.88 in Q1 2024, signaling ongoing earnings growth. Net income rose 6.7% to $5.08 billion, marking a record high for fiscal Q1 net income. The EPS growth reflects Merck's strong financial performance despite revenue challenges.

Post Earnings Price Action Review

Merck's backtest analysis reveals varying impacts of earnings report metrics on stock price. Following earnings, revenue and net income demonstrated higher short-term volatility, with win rates of 30% over 3 days and improving to 55% over 30 days for revenue, and 50% for net income. Diluted EPS presented lower volatility, with a 3-day win rate of 35% and a 30-day win rate of 50%. The stock showed a slight short-term increase, with a 10-day return of 0.43% and a 30-day return of 0.09%. The maximum return observed was 2.58% on day 52, indicating potential medium-term appreciation. Overall, while short-term fluctuations are noted, Merck's stock price has potential for recovery and growth in the medium term post-earnings release.

CEO Commentary

Merck's CEO expressed optimism about the company's growth drivers, emphasizing Keytruda's strong sales performance and strategic management of Gardasil-related challenges. Despite lower demand for Gardasil in China, the CEO highlighted ongoing strategic decisions to manage inventory. The company remains committed to its innovative product pipeline and investments in R&D, especially in oncology and animal health, positioning Merck for future growth despite current market dynamics.

Guidance

Merck projects 2025 sales between $64.1 billion and $65.6 billion, with adjusted EPS ranging from $8.88 to $9.03. The guidance accounts for potential impacts from tariffs, estimating an incremental cost of approximately $200 million. Merck is focused on maintaining growth through strategic investments and robust product pipelines while navigating the evolving pharmaceutical industry landscape.

Additional News

Merck is actively pursuing strategic acquisitions, notably the planned acquisition of SpringWorks Therapeutics, a U.S. biopharmaceutical company, for an enterprise value of $3.4 billion. This acquisition aims to strengthen Merck's presence in the U.S. and expand its reach globally, particularly in rare tumors. The deal aligns with Merck's strategic focus on external innovation and growth in healthcare, and it is expected to contribute to revenue and earnings growth. The transaction is anticipated to close in the second half of 2025, pending regulatory approvals.