Merck KGaA Stock Decline Following Q3 Earnings Report

Shares of Merck KGaA (ETR:MRCG) fell over 4% on Thursday after a mixed response to its third-quarter earnings report and revised full-year guidance.

While the pharmaceutical and life sciences giant posted results largely in line with expectations, a slight adjustment to its 2024 sales outlook has impacted its shares negatively.

> “After weak performance over the last few months, we consider today's outlook comforting into next year, where there should be moving parts to an acceleration of growth excluding Healthcare,” stated analysts at Stifel in a note.

Merck’s third-quarter group sales fell short of consensus by 1%, while EBITDA pre-exceptionals exceeded expectations by 4%, driven by lower-than-expected R&D expenses in its Healthcare segment.

Stifel views the results as positive but unlikely to shift investor sentiment, mentioning that the EBITDA beat, mainly driven by cost controls and a favorable product mix in Healthcare, lacks the desired topline growth from Life Science or Electronics.

However, Life Science sales undershot projections by 2%, primarily due to weaker performance in Life Science Services, which reported a 19% year-over-year decline. This decline was attributed to uneven revenues in the contract development and manufacturing organization business, which saw a one-time payment in the previous year related to COVID-19 operations.

Merck’s Electronics segment also faced challenges, experiencing a 3% sales miss. Demand for semiconductor materials linked to AI applications was too weak to offset sluggish recovery in the broader semiconductor market.

The revised downward forecast for Merck's full-year sales guidance, now expected at the lower end of its previously stated range, reflects potential softness in demand across key sectors as the company navigates a complex global market.

> “We estimate that the implied FY24 guidance is 1% below consensus on sales, in-line on EBITDA-pre, and 1% above on EPS pre,” according to analysts at Morgan Stanley (NYSE:MS).