Merck shares fall 4% as second quarter EBITDA misses estimates

Investing.com -- Merck KGaA (ETR:MRCG) reported second quarter earnings that missed analyst expectations, with EBITDA pre falling 3.1% to €1.5 billion, approximately 4% below consensus estimates. The German science and technology company’s shares fell 4% following the release.

While Merck delivered 2.0% organic sales growth in the quarter, strong negative foreign exchange effects, particularly from the weakening U.S. dollar against the euro, weighed heavily on results. Group net sales declined 1.8% to €5.3 billion due to these currency headwinds, which impacted sales by 4.2% and EBITDA pre by 7.2%.

The company’s Electronics business significantly underperformed, with EBITDA pre declining 47.6% to €134 million, a 44% miss versus consensus. This was driven by one-time effects including a purchase price allocation adjustment and supplier-related issues, estimated to impact results by €60-70 million.

"We have delivered solid underlying sales and earnings growth," said Belén Garijo, Chair of the Executive Board and CEO of Merck. "Yes, currency effects are taking their toll. But by standing on three pillars – Life Science, Healthcare and Electronics – we are, as a Group, better able to withstand the geopolitical, economic and currency swings."

The science and tech company now expects 2025 organic EBITDA pre growth of 4% to 8%, up from 2% to 7%, and narrowed its organic sales growth forecast to 2% to 5%. 

Life Science is projected to grow 3% to 6% in sales, Healthcare 3% to 5%, and Electronics is forecast to decline 1% to 5%.

Healthcare and Life Science drove growth. Healthcare EBITDA pre rose 8.8% to €783 million on a 20% organic gain, despite a 5.2% foreign exchange impact. 

Sales were led by Mavenclad, which climbed 20.7% organically to €307 million, and Erbitux, up 10.9%. 

Oncology sales rose 3.9% organically, while Neurology and Immunology grew 2.6%. Rebif fell 26.1%, and Bavencio declined 12.1%. 

The Cardiovascular, Metabolism and Endocrinology franchise posted 4.7% organic growth, with gains across Glucophage, Euthyrox, Concor and Saizen. Fertility fell 3.4% organically, as Pergoveris rose 20.5% and Gonal-f dropped 12.5%.

Life Science EBITDA pre fell 1.3% to €646 million, while organic sales rose 3.7% to €2.27 billion. Process Solutions led growth with an 11.5% increase, its best performance in two years.

Science & Lab Solutions recorded flat organic sales, while Life Science Services declined 8.2% due to weak biotech funding.

Electronics reported a 47.6% drop in EBITDA pre to €134 million and a 7.4% sales decline to €886 million. 

Organic sales fell 5.6% amid weaker results in Delivery Systems & Services and one-time effects, including a purchase price allocation adjustment and a supplier-related provision. 

Semiconductor Materials posted its highest revenue since 2022, supported by demand tied to AI. Optronics remained stable. Surface Solutions declined 6.4% and was divested on July 31.

Merck completed the $3.4 billion acquisition of SpringWorks Therapeutics on July 1, expanding its rare tumor pipeline.

On July 18, the European Commission conditionally approved Ezmekly (mirdametinib), developed by SpringWorks, for treating inoperable plexiform neurofibromas.

Profit after tax rose 8.3% to €655 million. Earnings per share rose 7.1% to €1.50, while EPS pre fell 8.2% to €2.02. Operating cash flow dropped 34.2% to €567 million.