Merck (MRK) Up 1.7% Since Last Earnings Report: Can It Continue?

A month has gone by since the last earnings report for Merck (MRK). Shares have added about 1.7% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Merck due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Q4 Earnings & Sales Beat Estimates

Merck reported fourth-quarter 2025 adjusted earnings per share (EPS) of $2.04, which beat the Zacks Consensus Estimate of $2.03. Earnings increased 19% year over year, on a reported basis and excluding foreign exchange (Fx).

Including acquisition and divestiture-related costs, restructuring costs, income and losses from investments in equity securities and certain other items, earnings were $1.19 per share in the fourth quarter, down 20% on a reported basis and 18% excluding FX.

Adjusted as well as reported earnings included a charge of 5 cents per share related to the acquisition of MK-8690 from Dr. Falk Pharma GmbH (Falk), compared with a charge of 23 cents in the year-ago quarter related to licensing agreements with LaNova Medicines and Hansoh Pharma.

Revenues in the fourth quarter increased 5% year over year on a reported basis and 4% excluding Fx to $16.40 billion. Sales beat the Zacks Consensus Estimate of $16.19 billion. Higher sales of Keytruda and other oncology drugs and contribution from new products like Winrevair, Welireg and Capvaxive and the Animal Health segment were offset by lower sales of Gardasil and some other vaccines.

Quarter in Detail

The Pharmaceutical segment generated revenues of $14.84 billion, up 6% year over year (4% excluding FX). Pharmaceutical segment revenues beat the Zacks Consensus Estimate of $14.66 billion.

All sales growth numbers discussed below exclude FX impact.

Oncology Drugs

Keytruda generated sales of $8.37 billion in the quarter, up 5%. Keytruda sales beat the Zacks Consensus Estimate of $8.31 billion. Keytruda sales benefited from rapid uptake across earlier-stage indications and continued strong momentum in metastatic indications. However, growth was negatively impacted by approximately $200 million due to the unfavorable timing of wholesaler purchases in the United States.

Keytruda sales in the fourth quarter included $35 million in sales of Keytruda Qlex, the subcutaneous formulation of Keytruda.

Merck is seeing an increase in usage of Keytruda in tumors that primarily affect women, including cervical, breast and endometrial cancers, as well as Keytruda in combination with Padcev in first-line, locally advanced or metastatic urothelial cancer.

Alliance revenues from Lynparza and Lenvima also aided oncology sales in the third quarter. 

Alliance revenues from Lynparza increased 4% to $389 million in the quarter, driven by higher demand globally. Lenvima alliance revenues totaled $272 million, up 6%.

Welireg recorded sales of $220 million, up 37%, driven by increased use in certain patients with previously treated advanced renal cell carcinoma in the United States, as well as continued launch uptake in certain international markets.

Vaccines

In vaccines, sales of HPV vaccines — Gardasil and Gardasil 9 — plunged 35% to $1.03 billion due to lower demand in China and Japan. Gardasil/Gardasil 9 sales narrowly missed the Zacks Consensus Estimate of $1.04 billion.

Gardasil sales rose 8% in international markets other than China and Japan, gaining from the favorable timing of purchases. In the United States, sales rose 7% due to higher prices.

Proquad, M-M-R II and Varivax vaccines recorded combined sales of $619 million, up 3%. Sales of the rotavirus vaccine, Rotateq, declined 15% to $119.0 million, while Pneumovax 23 (pneumococcal vaccine polyvalent) vaccine sales declined 44% to $42 million.

Sales of the pneumococcal 15-valent conjugate vaccine Vaxneuvance declined 16% to $140 million.

Capvaxive generated sales worth $279 million compared with $244 million reported in the previous quarter, driven by demand from both retail pharmacies and non-retail customers, including gains from increased seasonal immunization activity in the United States.

Sales of the new RSV vaccine, Enflonsia, in the United States were $21 million in the fourth quarter compared with $79 million in the third quarter of 2025. A lower-than-expected infant immunization rate and high inventory levels in the market hurt sales in the fourth quarter.

Other Drugs

In the hospital specialty portfolio, Bridion generated sales of $499 million in the quarter, up 11%. While the drug’s sales benefited from higher demand in the United States, the gains were offset by generic competition in certain ex-U.S. markets.

Prevymis recorded sales of $275 million, up 26% year over year. 

Januvia/Janumet franchise sales rose 3% year over year to $501 million. Sales of the drug were driven by higher net pricing in the United States, offset by lower demand in China and generic competition in most international markets.

New PAH drug Winrevair generated sales of $467 million, up 133% on a year-over-year basis and 29.7% on a sequential basis, reflecting continued strong uptake in the United States, partially offset by lower pricing due to Medicare Part D redesign. Early launch uptake in some international markets also contributed to growth.

Ohtuvayre, added from the October 2025 acquisition of Verona Pharma, contributed $178 million in sales in the quarter, backed by strong growth in new patient starts and total patients treated

Sales of Lagevrio (molnupiravir) declined 53% to $57 million in the fourth quarter.

Merck’s Animal Health segment generated revenues of $1.51 billion, up 8% year over year on a reported basis and 6% excluding FX. This growth was driven by higher demand for livestock products. Sales from this segment beat the Zacks Consensus Estimate of $1.48 billion.

Sales of livestock products rose 9% to $897 million, driven by higher demand across all species and improved supply and new product launches. Sales of companion animal products were flat at $518 million as growth from new product launches was offset by fewer vet visits.

Full-Year 2025 Results

Full-year 2025 sales rose 1% (2% ex Fx) to $65.01 billion, surpassing the Zacks Consensus Estimate of $64.80 billion. Sales were in line with the upper end of the guided range of $64.5-$65.0 billion. Pharmaceutical sales grew 1% (1% excluding Fx) to $58.14 billion.

Adjusted earnings for 2025 were $8.98 per share, increasing 17% year over year on a reported basis and 19% excluding Fx. Full-year adjusted earnings beat the Zacks Consensus Estimate of $8.95 per share and were at the higher end of the company’s guided range of $8.93 and $8.98.

Margin Discussion

Adjusted gross margin was 79.7%, down 110 basis points year over year, due to higher inventory write-offs, which offset the impact of a favorable product mix.

Adjusted selling, general, and administrative expenses were $2.85 billion in the fourth quarter, up 1% year over year due to higher administrative costs, partially offset by lower promotional costs.

Adjusted research and development spending was $3.99 billion, down 13% from the year-ago quarter levels. The decrease was due to lower charges for business development activity than the year-ago quarter.  In the fourth quarter, Merck recorded a charge of $150 million related to the Dr. Falk Pharma agreement for rights to MK-8690, which was much lower than $700 million recorded in the year-ago quarter.

Excluding these business development charges, operating expenses were flat in the quarter.

Issues 2026 Guidance

Merck issued a fresh earnings and sales outlook for 2026.

Merck expects revenues to be in the range of $65.5-$67.0 billion in 2026, representing year-over-year growth of 1% to 3%. 

In 2026, while Merck expects increasing contributions from new launches as well as continued strength in oncology and Animal Health to drive top-line growth, it expects generic competition, IRA price setting, significantly lower sales of Lagevrio, and the revised agreement with AstraZeneca for Koselugo to partially offset the growth. Generic competition for Januvia/Janumet, Bridion and Dificid is expected to hurt revenues by approximately $2.5 billion.

Adjusted earnings per share are expected to be between $5.00 and $5.15. The guided range includes a one-time charge of $9 billion or $3.65 per share related to the acquisition of Cidara Therapeutics, which closed in January 2026.

The 2026 guidance represents a significant decline from adjusted EPS of $8.98 in 2025 due to higher charges related to business development transactions. In 2025, Merck recorded a one-time charge of 20 cents per share related to business development transactions compared to an expected charge of $3.65 per share in 2026 for the acquisition of Cidara.

Excluding the charge of $3.65 related to the Cidara deal plus around 30 cents of ongoing costs to advance MK-1406, added from the Cidara acquisition, and other costs to finance the acquisition, the mid-point of the 2026 adjusted EPS guidance would be $9.03, an increase from adjusted EPS of $8.98 recorded in 2025.

The guidance includes a positive impact from Fx of approximately 1% on sales and around 10 cents on EPS.

The adjusted gross margin is expected to be around 82%.

Adjusted operating expenses are expected to be in the range of $35.9 billion to $36.9 billion, which includes a charge of approximately $9 billion related to the acquisition of Cidara. The adjusted tax rate is expected to be approximately 23.5% to 24.5%.

In 2026, Merck expects to buy back shares worth $3 billion.

On the conference call, Merck said it expects over $70 billion of potential non-risk-adjusted commercial opportunity for the current pipeline by the mid-2030s. Merck pointed out that this estimate was more than double the peak consensus estimate for Keytruda revenues of $35 billion in 2028. Merck said that the estimate of $70 billion was $20 billion more than its previous estimate a year ago.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a upward trend in fresh estimates.

The consensus estimate has shifted -277.23% due to these changes.

VGM Scores

At this time, Merck has a poor Growth Score of F, a grade with the same score on the momentum front. However, the stock has a grade of C on the value side, putting it in the middle 20% for value investors.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions indicates a downward shift. Interestingly, Merck has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.

Performance of an Industry Player

Merck belongs to the Zacks Large Cap Pharmaceuticals industry. Another stock from the same industry, Roche Holding AG (RHHBY), has gained 1.1% over the past month. More than a month has passed since the company reported results for the quarter ended December 2025.

Roche Holding reported revenues of $1.73 billion in the last reported quarter, representing a year-over-year change of 0%. EPS of $0.00 for the same period compares with $0.00 a year ago.

For the current quarter, Roche Holding is expected to post earnings of $1.32 per share, indicating a change of 0% from the year-ago quarter. The Zacks Consensus Estimate has changed 0% over the last 30 days.

Roche Holding has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of A.

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This article originally published on Zacks Investment Research (zacks.com).

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