Merck Stock (MRK) Hitting Highs Into Earnings – Eyes On Breakout

Merck’s stock price (NYSE:MRK) hit a new high of $113.89 ahead of this morning’s earnings report, raising expectations leading in. With the stock having added an impressive 41.96% over the past 6 months of trading, bullish momentum is clearly with the name ahead of the print, with a glance at the chart showing clear signs of a breakout.

The quarter provides the read on whether management can credibly frame a post-Gardasil-China and pre-Keytruda-LOE runway after a year in which the stock gained 13% while consensus EPS expectations compressed from $9.13 to $8.89.

Consensus sits at $2.01-$2.04 adjusted EPS and $16.1B-$16.2B revenue, both positioned to meet the company’s most recent FY2025 guidance midpoint of $64.75B sales and $8.96 adjusted EPS.

The setup creates risk: execution consistent with guidance will be priced in, while the stock’s reaction will hinge on whether the 2026 outlook reduces uncertainty around Gardasil-China stabilization and the Keytruda growth slope into the 2028 patent expiration.

The year’s narrative arc was defined by guidance-driven estimate resets, not reported-quarter execution. Merck beat adjusted EPS consensus in each of the last four quarters, capped by Q3’s $2.58 versus $2.35 (9.8% surprise), yet the stock’s most violent move came on the Q4 2024 report when shares dropped 10% as management’s FY2025 outlook collided with visible Gardasil-China demand weakness.

From there, the Street de-risked: analysts cut FY2025 adjusted EPS from $9.13 (February 2025) to $8.89 (October 2025) as Gardasil-China uncertainty persisted, even as Merck layered on cost actions, updated tariff assumptions, and portfolio reshaping that supported EPS.

Consensus Estimates

Consensus expectations for Q4 2025 are positioned to meet rather than exceed management’s most recent guidance framework. The $2.01-$2.04 adjusted EPS range implies Q4 will deliver the balance needed to reach the FY2025 midpoint of $8.96, while the $16.1B-$16.2B revenue estimate aligns with the $64.75B full-year sales midpoint. The setup reflects a market that has learned to anchor to guidance after a year in which beats on reported quarters were consistently overshadowed by outlook adjustments.

Management Guidance and Commentary

“Delivering value through innovative portfolio while securing future with pipeline investments.”

Management’s most recent guidance update came with the Q3 2025 results on October 30, when Merck raised and tightened FY2025 adjusted EPS to $8.93-$8.98 (midpoint $8.96) and narrowed sales to $64.5B-$65.0B (midpoint $64.75B). The company explicitly cited benefits from a more favorable estimated tax rate and lower estimated tariff costs, partially offset by the Verona Pharma acquisition and foreign exchange.

The Q3 commentary reinforced the dual narrative that has defined Merck’s year: operational execution remains strong (Q3 revenue of $17.28B beat consensus of $16.96B), but visibility on key growth drivers remains constrained. CEO Robert Davis framed the quarter around “delivering value through innovative portfolio” while “securing future with pipeline investments,” language that acknowledged the market’s focus on the post-Keytruda runway.

Keytruda’s growth trajectory into the 2028 patent expiration remains the central focus for investors

Analyst Price Targets & Ratings

Wall Street maintains a cautiously optimistic stance, with 75% of analysts rating shares a Buy or Strong Buy. The consensus target of $117.58 implies modest 4.6% upside from current levels, reflecting uncertainty around the post-Keytruda growth trajectory and Gardasil-China recovery timeline.

Sector & Peer Comparison

Merck trades at a forward P/E of 9.1x, significantly below large-cap pharma peers Johnson & Johnson (16.4x), Eli Lilly (27.2x), and AbbVie (13.1x), despite delivering a 29.6% profit margin that ranks at the top of the peer group. The valuation discount reflects the market’s focus on Keytruda’s 2028 LOE and the uncertainty around whether Merck’s pipeline can sustain growth post-patent expiration.

Earnings Track Record

Merck has beaten or met adjusted EPS consensus in 15 of the last 16 quarters, establishing a 93.8% beat rate with an average surprise of 15.2%. The most recent four quarters show a consistent pattern: beats ranging from 3.0% to 8.9%, with Q3 2025’s $2.58 versus $2.37 marking the largest surprise of the year.

Post-Earnings Price Movement History

Merck’s post-earnings price reactions demonstrate that guidance credibility, not the magnitude of the EPS beat, drives the stock’s movement. The Q3 2025 reaction is particularly instructive: despite initially declining 3% pre-market, shares ultimately closed up 14.7% as the market digested the raised and tightened FY2025 guidance.

Expected Move & Implied Volatility

The options market is pricing a 3.4% expected move for Merck’s Q4 2025 earnings, modestly below the 4.1% average next-day move on beats but in line with the 3.4% historical average across all results. This pricing reflects a market that sees execution risk as contained given the 93.8% beat rate, but guidance risk as elevated given the year’s pattern of outlook-driven reactions.

CEO Robert Davis and 9 other executives purchased $16M in stock at $107.40 on January 26, signaling management confidence

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