Should You Buy Merck Stock After An Upbeat Q2?

Merck stock (NYSE: MRK), after an 8% fall in a month, underperforming the broader markets, with the S&P500 up 3%, appears to have room for growth. The company posted upbeat Q2 results this week, with solid growth for Keytruda and Gardasil. Merck’s revenues were up 3% to $15.0 billion in Q2’23, compared to the consensus estimate of $14.4 billion. This growth was driven by a 19% rise in Keytruda sales and a stellar 47% rise in Gardasil sales. This can be attributed to continued market share gains for Keytruda and label expansion. Merck’s Covid-19 antiviral treatment – Lagevrio – saw an 83% y-o-y fall in sales. Excluding Lagevrio, the top line expanded by 11%.

The company’s gross margin improved by nearly 200 bps to 73.2% due to a better product mix and lower sales of the low-margin drug – Lagevrio. Merck has seen its operating margin rise from 18.7% in 2019 to 30.3% in 2022. Our Merck Operating Income Comparison dashboard has more details. Merck reported a loss of $2.06 on a per share and adjusted basis in Q2, compared to a profit of $1.87 per share in the prior-year quarter. However, this is due to the company’s one-time charge of $10.2 billion toward the Prometheus acquisition, which will help Merck strengthen its immunology drugs portfolio.