Can Merck And Pfizer Beat Low Expectations?

• The two pharmaceutical Dow components are expected to report earnings this week.
• Both of them are expected to show a decline in earnings from a year ago.
• Also, they both tend to exceed consensus earnings estimates.

Most of the Dow Jones Industrial Average components have already reported their recent earnings, but there are a few more taking their turns in the spotlight this week, including pharmaceutical giants Merck & Co., Inc. MRK and Pfizer Inc. PFE.

Wall Street consensus forecasts call for earnings that are smaller than a year ago from both companies. This was for the period when Merck announced results on Ebola and cancer treatments, and Pfizer got an FDA approval but also was slapped with a fine over pricing.

Merck

When Merck shares its fourth-quarter results, the analysts on average predict that its earnings per share will have dropped more than 5 percent from a year ago to $0.88; The $10.19 billion in expected revenue would be marginally lower. Note that this New Jersey–based company has exceeded consensus EPS estimates in the past eight quarters.

The forecast from 14 Estimize respondents is slightly more optimistic, with EPS expected to come in at $0.89. But that would be $0.18 lower than in the prior quarter. The consensus revenue estimate for the three months that ended in December is $10.22 billion. Note that Merck's top-line results topped Estimize forecasts in the previous two periods.

Pfizer

Wall Street's consensus forecast for Pfizer calls for EPS to have slipped from $0.53 in the same period of last year to $0.50. But the New York–based company has topped analysts' EPS expectations in five of the past six quarters. The 27 Estimize respondents also have a consensus estimate of $0.50 per share for the three months that ended in December.

Estimize overestimated revenue in the previous quarter, after underestimating it for several before that. This time the respondents are looking for $13.55 billion, which is shy of the Wall Street consensus forecast for the fourth quarter of $13.64 billion. Either figure would be around 3 percent lower than in the year-ago period, but the highest reading in the past three quarters.

Pfizer is scheduled to report its latest results before the opening bell on Tuesday, while Merck is expected to share its numbers first thing Thursday morning.

Best Of The Rest

It's not all doom and gloom as far as earnings expectations for the other pharmaceutical and health care companies also sharing their results this week though. While Wall Street anticipates smaller earnings from AmerisourceBergen and Cigna as well, at least some growth on the bottom line is expected at Aetna, Amgen, Anthem, AstraZeneca, Athenahealth, Baxter, Boston Scientific, Edwards Lifesciences, Eli Lilly, HCA, Ilumina, Novo Nordisk and Thermo Fisher Scientific.

As for the other Dow companies reporting this week, a decline in profit but with a gain in revenue is forecast for Apple. At Exxon Mobil and Visa, top and bottom line growth will be reported, if the analysts are correct.

Upcoming quarterly reports from Dow components to watch for include those from Cisco, Coca-Cola, Home Depot, Wal-Mart and Walt Disney.

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