Merck Continues To Ride Cancer Drug Keytruda Higher

Shares of Merck (MRK) closed up 3.50% today, October 29, after the company reported better than expected third quarter earnings. On a Non-GAAP basis earrings of $1.51 a share beat the Wall Street consensus by 27 cents a share. Revenue of $12.4 billion fell 6.7% year over year but beat analysts projections of $11.64 billion. (On the earnings front, it is ‘intellectually” important to note that on a GAAP basis (Generally Accepted Accounting Principles) earnings per share of 74 cents actually missed estimates by 22 cents a share. But Wall Street earnings estimates almost never dock companies for one-time charges. So while the stricter accounting standard is called “Generally Accepted,” it is indeed not generally accepted as the basis for Wall Street consensus earnings estimates.)

The big driver for Merck continued to be Keytruda, the market leader by far among treatments for lung cancer (and increasingly other cancers too.) Keytruda sales topped $3 billion in a quarter when total revenue was $12.4 billion. Keytruda sales grew 62% year over year .

Another driver was the company’s human vaccines unit where sales grew 17% year over year to $2.5 billion with a 26% increase in revenue from the company’s Gardasil vaccine to protect against nine types of HPV (human papillomavirus) and the related cancers caused by HPV.

Merck narrowed its earnings forecast for the full 2019 year to a range of $5.12 to $5.17 a share. That’s ahead of the Wall Street consensus of $4.92 a share.

Merck’s share currency yield 2.68%. The company did not announce a dividend increase today but is widely expected by analysts to raise its dividend by 15% to 63 cents a share from the current 55 cents a share. The company played it coy during the conference call saying only that it remained committed to return any cash beyond capital spending needs to shareholders.

Merck is a member of my Dividend Income Portfolio. The position is up 43.10% since I added the stock to this portfolio on April 30, 2018.