Merck Q4 Profit Beats View, But Outlook Disappoints

(RTTNews) - Healthcare giant Merck & Co. Inc. (MRK) on Wednesday reported a surge in profit for the fourth quarter from last year, as a gain on the sale of the company's consumer care business helped offset lower sales on patent expirations and divestitures.

Adjusted earnings per share for the quarter beat analysts' estimates, while revenues missed their estimates. Looking ahead, the company forecast financial results for fiscal 2015 below Street expectations, citing the impact of a stronger U.S. dollar and divestitures.

For the fourth quarter, net income attributable to the company surged to $7.32 billion or $2.54 per share from $781 million or $0.26 per share in the previous-year quarter.

The latest quarter's results include a gain of $11.2 billion on the sale of the Merck Consumer Care business to German conglomerate Bayer AG (BYR.L, BAYRY.PK, BAYZF.PK).

Excluding items, adjusted earnings for the quarter were $0.87 per share, compared to $0.88 per share in the year-ago period. On average, 16 analysts polled by Thomson Reuters expected the company to report earnings of $0.86 per share for the quarter. Analysts' estimates typically exclude special items.

Worldwide sales for the quarter declined 7 percent to $10.48 billion from $11.32 billion last year. Analysts' consensus revenue estimate for the quarter was $10.50 billion.

The decline in sales for the quarter reflect a 7 percent negative impact from patent expiries and divestitures, in addition to a 3 percent negative impact from foreign exchange.

Pharmaceutical sales for the quarter decreased 4 percent to $9.37 billion, including a 4 percent negative impact from foreign exchange and a 3 percent negative impact reflecting about $200 million of lower sales from patent expiries and product divestitures.

The decline also reflected lower sales of cholesterol-lowering drugs Zetia/Vytorin, the hepatitis franchise of Victrelis and Pegintron; and arthritis drug Remicade.

Meanwhile, Animal Health sales for the quarter rose 2 percent to $885 million, including a 6 percent negative impact from foreign exchange. In companion animals, growth was supported by the global launch of Bravecto, a chewable tablet that kills fleas and ticks in dogs for up to 12 weeks.

Sales from Consumer Care products fell 96 percent to $16 million. On October 1, 2014, Merck completed the sale of its Consumer Care business to Bayer AG.

Merck's gross margin for the quarter 64.2 percent, up from 59.3 percent in the year-ago period.

For fiscal 2014, Merck's net income surged to $11.92 billion or $4.07 per share from $4.40 billion or $1.47 per share in the previous year. Adjusted earnings for the year were $3.49, the same as in the prior year.

Worldwide sales for the year decreased 4 percent to $42.2 billion from $44.03 billion last year.

Street expected the company to earn $3.48 per share for the year on revenues of $42.30 billion.

Looking ahead to fiscal 2015, Merck forecast reported earnings in a range of $1.62 to $1.91 per share, and adjusted earnings between $3.32 and $3.47 per share, including a $0.27 negative impact from foreign exchange.

At mid-January 2015 exchange rates, Merck anticipates full-year 2015 revenues between $38.3 billion and $39.8 billion, including a $2.6 billion negative impact from foreign exchange and about $1 billion of net lost sales from acquisitions and divestitures.

Analysts expect earnings of $3.49 per share for the year on revenues of $40.50 billion.

MRK closed Tuesday's trading at $61.02. In Wednesday's pre-market activity, the stock is down $1.21 or 1.98 percent to $59.81.