Most See Merck As a "$99 Fairly Valued" Stock -- But That May Be A Little Low -- If Multiple Expansion Comes With A Solid Beat, This Quarter...

We tend to be slightly conservative, when it comes to predicting P/E Multiple expansion events, even in a solid industry like big pharma. But I'll go out on a limb, and opine that Merck. . . is now due. . . for just such an expansion, if the EPS comes in on Thursday, ahead of guidance, or ahead of consensus. That is, a 13X multiple of earnings. . . may move toward a 14X, or even perhaps toward. . . 15X. . . in the back half of the year 2022, given how strong all of Merck's businesses are (especially compared to "cyclicals" facing all sorts of headwinds).

We shall see -- but as ever, I like getting a stake in the ground, ahead of the pack here (at the WSJ, Forbes and elsewhere).

Here's the prognostication:

. . .Merck’s Q2 2022 adjusted earnings per share is expected to be $1.73 per Trefis analysis, slightly above the consensus estimate of $1.69.

Merck’s adjusted net income of $5.4 billion in Q1 2022 reflected a significant 84% rise from its $2.9 billion figure in the prior-year quarter, led by higher revenues and expansion of operating margins. The company’s SG&A and R&D grew only in mid-single-digits in Q1, compared to a 50% rise in total revenue.

However, inflationary headwinds and supply chain constraints threaten margin expansion in the near term. . . .

We shall -- as ever -- see, come Thursday (though we may be off grid, at various museums, concerts and camping / hiking events, through end of week. . . at least). So you may need to. . . check for yourself on Thursday -- around midday. Grin.

नमस्ते