Citi Reports Strong 1Q11 Results For Merck

According to Citi, Merck MRK reported strong 1Q11 results with EPS of $0.92 (+11%), +$0.07 above estimate and +$0.06 above the Street. Citi said that revenues came in $224M above projection at $11.58B (+1%) vs. 11.36B & the Street $11.37B (+$0.04 EPS impact). “The performance was driven by pharma & consumer sales, higher gross margin (+$0.04) and lower SG&A/R&D spending (+$0.08), partially offset by a much higher tax rate (-$0.06), & lower Equity/Other Income (-$0.04). MRK raised the lower end of its 2011 EPS range by $0.02 to $3.66 (+6%), while maintaining the top end at $3.76(+10%), compared to our $3.68 and the Street's $3.69. MRK reiterated its revenue target of “low- to mid-single digits” implying $46.9B (+1%) to $48.8B (+6%), vs. our $46.9B & the Streets $47.1B. MRK also lowered its R&D target range by $100M to $8.0B-$8.4B. MRK's ability to raise its 2011 EPS range is tempered by the $0.08 to $0.09 impact to earnings from the resolution of its arbitration dispute with JNJ. We see MRK's attractive dividend (4.3% yield) & recently announced $5B share repo program (in addition to $1.4B authorization) limiting downside to its shares. MRK has 5 products under regulatory review however, we these assets as largely singles & doubles. We look for greater visibility on its pipeline during an R&D review later this year.” Merck closed yesterday at $35.79.