For the first quarter, Merck expects to earn 62 cents to 66 cents a share before restructuring charges. Analysts were forecasting 64 cents a share. Merck also reaffirmed its full-year EPS target of $2.28 to $2.36, excluding items. Analysts were calling for $2.33 a share.
"The risk to the shares is the Vioxx liability," says Barbara Ryan of Deutsche Bank Securities, in a Tuesday research note. "However, shareholders are currently being compensated with a 5%-plus dividend yield, which is secure."
Ryan says her buy rating is based in part on Merck's
Merck enters 2006, knowing that its best-selling drug, Zocor, will lose its U.S patent by midyear. The cholesterol drug has been losing patent protection in foreign markets, which played a role in an 18% drop for fourth-quarter 2005 sales to $1.07 billion. For all of 2005, Zocor produced $4.38 billion in sales, down 16% from 2004.The Fosamax family of osteoporosis drugs recorded worldwide sales of $3.19 billion last year, up 1% from 2004, but fourth-quarter sales were down 5% to $789 million as generic competition overseas took its toll. Last year, the asthma medication Singulair gained 13% to $2.98 billion, and sales of the Cozaar/Hyzaar hypertension drugs gained 8% to $3.04 billion. Merck also derives income from several joint ventures. The biggest is its deal with Schering-Plough (SGP) to market two cholesterol drugs. One is for Zetia, made by Schering-Plough, and the other is Vytorin, which combines Zetia and Zocor. Merck said the joint venture's net sales -- it doesn't identify sales or profit for each company -- was $2.43 billion last year, or double the $1.19 billion in 2004.