Merck & Co. Inc. (NYSE:MRK) reported fourth-quarter financial results that narrowly surpassed analyst expectations, yet a cautious outlook for 2026 has tempered investor enthusiasm, leading to a decline in the stock's pre-market trading.
The pharmaceutical giant posted sales of $16.4 billion for the quarter, a 5% increase year-over-year, slightly edging out the consensus estimate of approximately $16.35 billion. The company's adjusted (non-GAAP) earnings per share (EPS) came in at $2.04, also marginally above the $2.03 analysts had forecast.
Fourth-Quarter Financial Performance vs. Estimates
- Reported Revenue: $16.4 billion
- Verdict: Slight beat versus estimate of ~$16.35 billion.
- Reported Non-GAAP EPS: $2.04
- Verdict: Slight beat versus estimate of $2.03.
The quarterly performance was driven by continued strong demand for its blockbuster cancer drug KEYTRUDA, which saw sales grow 7% to $8.37 billion. Newer launches also showed significant momentum, with pulmonary arterial hypertension drug WINREVAIR soaring 133% to $467 million and the newly acquired respiratory therapy OHTUVAYRE contributing $178 million. However, these gains were partially offset by a steep 34% decline in sales of the HPV vaccine GARDASIL, primarily due to lower demand in China.
Market Reaction and Forward Guidance
Despite the earnings beat, the market's immediate reaction was negative, with shares trading down approximately 0.8% in pre-market activity. This appears to be a direct response to the company's financial outlook for the full year 2026, which fell short of Wall Street's expectations.
The company provided its own sales and profit forecast, which investors are comparing to existing analyst projections.
- Merck's 2026 Sales Guidance: $65.5 billion to $67.0 billion.
- Analyst Consensus for 2026 Sales: Approximately $68.36 billion.
- Merck's 2026 Non-GAAP EPS Guidance: $5.00 to $5.15.
- Analyst Consensus for 2026 EPS: Approximately $5.72.
The guidance includes a significant one-time charge of approximately $3.65 per share related to the recent acquisition of Cidara Therapeutics. Even excluding this charge, the underlying operational outlook suggests challenges, most notably the continued pressure on GARDASIL sales. Management indicated that the vaccine may remain off the market in China this year, a headwind that appears to be weighing more heavily on investor sentiment than the strength in KEYTRUDA and newer products.
Key Takeaways from the Earnings Release
Beyond the headline numbers, management highlighted several critical points:
- Pipeline Momentum: The company emphasized progress in its late-stage pipeline, with positive results from 18 Phase 3 trials in 2025 and approximately 80 Phase 3 studies currently underway. Recent regulatory milestones include new approvals for KEYTRUDA in bladder cancer and the subcutaneous formulation in Europe.
- Strategic Acquisitions: The acquisitions of Verona Pharma (adding OHTUVAYRE) and Cidara Therapeutics are central to the company's strategy of building a more diverse portfolio beyond KEYTRUDA.
- Cost Management: Non-GAAP EPS growth for both the quarter and full year was attributed partly to lower business development transaction charges and benefits from a multi-year optimization initiative.
- U.S. Government Agreement: The company noted a recent agreement with the U.S. government on drug pricing, which includes plans for a direct-to-patient program and commitments for domestic manufacturing investment.
Conclusion
Merck's fourth-quarter results demonstrate the enduring strength of its core oncology business and successful early launches. However, the market's focus has swiftly shifted to the future, where guidance for 2026 signals a transition year. The substantial earnings impact from the Cidara acquisition and the lingering uncertainty around GARDASIL's recovery, particularly in China, have created a cloud of caution. Investors are now weighing the company's promising long-term pipeline and new product growth against these near-term financial headwinds.
For a detailed breakdown of future earnings estimates and historical performance, you can review more data here.
Disclaimer: This article is for informational purposes only and does not constitute financial advice, a recommendation, or an offer to buy or sell any securities. Investing carries risks, including the potential loss of principal.
