Guggenheim cuts Merck stock target to $108, keeps Buy rating

On Wednesday, Guggenheim Securities adjusted its outlook on Merck (NSE:PROR) & Co. Inc. (NYSE:MRK), lowering the price target to $108 from $115, while sustaining a Buy rating on the stock. The revision followed Merck’s first-quarter earnings report last week, which showcased robust performance, with sales and earnings per share (EPS) exceeding both Guggenheim’s and the consensus estimates. The positive results were attributed to increased revenues and lower taxes, though these were partly negated by rising costs, particularly in cost of goods sold (COGS) and selling, general & administrative expenses (SG&A).

Merck’s earnings beat was significantly driven by strong sales of Winrevair, although sales of Keytruda did not meet expectations. Nonetheless, the company is facing international market challenges, especially with its Gardasil vaccine. Management pointed to persistent issues in China and a diminishing benefit from the catch-up cohort in Japan, which is expected to slow growth outside of the United States and China.

Despite the favorable quarterly results and recent advantageous foreign exchange movements, Merck’s management has decided to maintain their full-year 2025 reported sales guidance. However, they have reduced the Non-GAAP EPS guidance by $0.06 at the midpoint. This adjustment takes into account an anticipated $200 million in-process research and development (IPR&D) charge in the second quarter, which is related to the completion of a license agreement with Hengrui Pharma (600276-CN).

Guggenheim’s revised model incorporates these recent developments and the updated discounted cash flow (DCF)-derived price target reflects the new expectations. The firm’s analyst reaffirmed confidence in Merck’s stock by maintaining the Buy rating, suggesting continued positive prospects for the pharmaceutical company despite the adjustments made following the first-quarter financial results. With a solid 3.82% dividend yield and a 14-year streak of dividend increases, Merck demonstrates strong shareholder returns. For deeper insights into Merck’s valuation and financial health metrics, including 8 additional ProTips, check out the comprehensive research available on InvestingPro.

In other recent news, Merck & Co., Inc. reported its Q1 2025 earnings, exceeding analyst expectations with earnings per share (EPS) of $2.22, surpassing the forecasted $2.14. The company also reported revenues of $15.5 billion, slightly above the projected $15.3 billion. Despite these positive results, Merck faced challenges, including a significant 40% decline in Gardasil sales in China, which impacted overall revenues by $1.1 billion. Keytruda sales, however, showed resilience with a 6% increase, reaching $7.2 billion, highlighting Merck’s strong position in the oncology sector. Merck maintains its full-year revenue guidance between $64.1 billion and $65.6 billion, with expected EPS ranging from $8.82 to $8.97. Analysts from firms such as Citibank and Bank of America have raised concerns about potential impacts from U.S. pharmaceutical tariffs and the expiration of Keytruda’s patent. Merck’s strategic focus remains on innovation and expanding its pipeline, with plans for new product launches and business development initiatives.

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