Good Time to Get in on Earnings-Winner Merck (NYSE: MRK)

It's undoubtedly tempting to focus attention and investment alike on pharmaceutical stocks that are hunting the coronavirus cure, but in so doing, it's easy to miss out on other big gains potentially available in the market. Gains with much less fanfare but no less solid results; gains like those seen recently from Merck (NYSE: MRK), which turned out to be solid if a bit unremarkable, much like the company itself.

The Solid But Unremarkable Win Detailed

A win is a win, and for Merck, this was a win. Quarterly earnings emerged at $1.37 per share, which readily beat the consensus estimate of $1.14 per share. Better yet, the earnings turned in actually beat the numbers seen at this time last year, which came in at $1.30 per share. There was some adjustment made for “non-recurring items,” reports noted, but the numbers are still sound enough.

What's more, this latest win contributes to a pattern of same with Merck; last quarter, earnings per share were expected in at $1.39, but came in at $1.50 per share. The company has actually beaten consensus every quarter for the last four quarters now.

Merck did falter a bit on revenues, as it produced $10.87 billion in revenue for the quarter, which was 0.42% shy of consensus expectations. One of the key points that kept revenues close to the expected mark were sales of Keytruda, Merck's cornerstone cancer drug. Moreover, it's also down a bit from the preceding year on revenue, which this time last year was $11.76 billion. Merck doesn't do quite as well in terms of beating revenue estimates; for the last four quarters, it's only beaten expectations twice now.

Better yet for investors, just a couple days ago, Merck declared that its dividend for fourth-quarter common stock would remain at $0.61 per share, with a yield of around 3.1%.

A History of Solid But Unremarkable Wins

Looking at the company's figures for the last year, recovery is actually pretty likely. It spent the better part of a year trading in a nearly-straight line in the $80 to $90 range, and most of the gain toward $90 didn't come until the last month or so of 2019.

The company started to fall off in the early days of 2020, and of course, got caught up in the massive sell-off that March and the coronavirus brought with it. It did snap back quickly, however, and has been pushing to get back in the $80 to $90 groove that pretty much exemplified 2019 for the company.

Throw in a consensus rating that not only leans strongly toward buy but has done so for four quarters now—currently, the stock has 11 buy and two hold ratings, with no sell or strong buy ratings—with a price target that's held at $94.15 for half a year now and the immediate future looks positive.

A Solid But Unremarkable Win to Come?

Looking at the immediate-term future for Merck—like next quarter or so—does suggest some positive developments. The track record that Merck has seen in its earnings figures, and even its revenue figures, suggests that the company can continue to produce similar results for some time to come.

Better yet, the company isn't sitting on its laurels. Like just about every other pharmaceutical company out there, it's working on developing coronavirus treatments. At the last report, it not only has two vaccines in the works, but it's also working on an “oral antiviral” drug designed to take the disease on.

The company further noted that it expects that the worst of the coronavirus-related impact to the company is behind it. It expects to not only see gradual recovery throughout the third quarter but ultimately a “...return to normal operating levels” when the fourth quarter hits. Merck took some impact based on the responses of state and local governments to coronavirus, with hospitals unable to process non-emergency procedures. With customers able to access healthcare again—including Merck's lineup of other, non-coronavirus vaccines—the company should turn around.

f Merck can achieve a win on a coronavirus vaccine, it's likely to have a buyer waiting in the US government, which has been shown on a buying frenzy when it comes to any kind of vaccine for the disease. That's also likely to be the case if Merck can develop a therapeutic drug; the US government was waiting with arms wide open on Gilead Sciences' (NASDAQ: GILD) remdesivir, and it had already bought up plenty of hydroxychloroquine, so if Merck can come out with any kind of decently-priced therapeutic for coronavirus, there will likely be a sale waiting.

A maintained dividend is certainly cause for hope, and Merck's solid lineup of unremarkable yet highly functional drugs doesn't hurt either. Throw in some potentially exciting new developments and it adds up to a stable position that investors will likely want to consider more closely.