03. Merck & Co., Inc. (NYSE:MRK)
Forward Price to Earnings (P/E) ratio: 11.19
Number of Hedge Fund Holders: 96
Merck & Co., Inc. (NYSE:MRK) operates as a healthcare company worldwide. It operates through two segments, Pharmaceutical and Animal Health. Merck & Co., Inc. (NYSE:MRK) is a strong candidate for inclusion in blue-chip stocks with low price-to-earnings (PE) ratios, sporting a forward PE ratio of 11.19 as of October 11, 2024. This pharmaceutical giant has consistently demonstrated robust financial performance and innovation, as reflected in its Q2 2024 earnings report, where the company exceeded earnings expectations with an EPS of $2.28, surpassing the anticipated $2.17.
One of Merck & Co., Inc. (NYSE:MRK) standout strengths lies in its diversified portfolio, including a significant presence in oncology, vaccines, and animal health. In Q2, the company generated total revenues of $16.1 billion, a 7% year-over-year increase, with its human health segment seeing 11% growth. This performance was primarily driven by the continued success of its blockbuster cancer drug, KEYTRUDA, which saw sales rise by 21% to $7.3 billion. KEYTRUDA’s growth was fueled by increased adoption in both earlier-stage and metastatic cancer treatments, solidifying Merck’s leadership in the oncology space.
In addition to its oncology portfolio, Merck’s vaccine division continues to perform well, with GARDASIL generating $2.5 billion in sales during the quarter. The company’s recent FDA approval for CAPVAXIVE, a pneumococcal vaccine designed for adults, further strengthens its position in the vaccine market and opens up new revenue streams. Merck & Co., Inc. (NYSE:MRK) recent acquisition of EyeBio also positions it as a future leader in ophthalmology, targeting retinal diseases—an area of unmet medical need.
The company’s animal health segment showed a solid performance with a 6% increase in sales, underpinned by growth in livestock products. Merck & Co., Inc. (NYSE:MRK) recent acquisition of Elanco’s aqua business has expanded its footprint in this sector.
From a financial standpoint, Merck & Co., Inc. (NYSE:MRK) gross margin improved to 80.9%, reflecting strong operational efficiency and favorable product mix. The company raised its full-year revenue guidance to a range of $63.4 to $64.4 billion, signaling continued growth potential. With a strong pipeline, disciplined investments, and robust earnings growth, Merck & Co., Inc. (NYSE:MRK) remains an attractive investment option for those seeking blue-chip stocks with low PE ratios.
Oakmark Equity and Income Fund stated the following regarding Merck & Co., Inc. (NYSE:MRK) in its Q3 2024 investor letter:
“Merck & Co., Inc. (NYSE:MRK) is a global pharmaceutical firm with leading oncology, vaccine and animal health franchises. Premier products in Merck’s portfolio include Keytruda, Gardasil, Winrevair and Bravecto. Outsized contributor Keytruda is an immuno-oncology drug that treats several cancers and tumors. Keytruda is an astounding clinical and commercial success that is on track to become one of the best-selling prescription drugs to date. Investor angst surrounding Keytruda’s pending U.S. patent expiration in 2028 presented a chance to buy shares at a discounted valuation. We believe opportunities to extend Keytruda’s duration through life cycle management are underappreciated. More importantly, discounted cash flows from products already on market cover today’s entire stock price, meaning there is minimal value ascribed to a promising pipeline with strong sales potential. We believe Merck is led by a capable management team that looks to reinvest these cash flows in an accretive manner.”
