What Happened?
Shares of global pharmaceutical company Merck (NYSE:MRK) fell 3.2% in the afternoon session after the company reported second-quarter financial results that missed revenue expectations and revealed a new multi-year cost-cutting initiative. The pharmaceutical giant posted total sales of $15.8 billion, representing a 2% decrease from the same period last year. This revenue shortfall was primarily driven by a steep 55% drop in sales for its Gardasil vaccine, which faced declining demand in China. While the company's earnings per share beat analysts' forecasts, investors appeared to focus on the top-line miss. Alongside the earnings, Merck announced a major restructuring plan aimed at saving $3 billion annually through measures that included layoffs and real estate reductions. The company stated these savings would be reinvested to support new product launches and its research pipeline.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Merck? Access our full analysis report here, it’s free.
What Is The Market Telling Us
Merck’s shares are not very volatile and have only had 5 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 6 months ago when the stock dropped 11% on the news that the company reported mixed fourth-quarter earnings. Its full-year revenue and EPS guidance missed by a long shot. The company blamed some of the softness on rising competition and weak demand in China. On the other hand, Merck blew past analysts' constant currency revenue expectations this quarter, and its EPS outperformed Wall Street's estimates. Overall, this was a softer quarter.
Merck is down 17.1% since the beginning of the year, and at $82.19 per share, it is trading 35.7% below its 52-week high of $127.78 from July 2024. Investors who bought $1,000 worth of Merck’s shares 5 years ago would now be looking at an investment worth $1,036.
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