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business newsTicker Shock: Four Reasons to Get Bullish on Merck
Tuesday's top stories and stocks with potential to move.
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Asian stocks ended mixed. The Hang Seng was flat. The Nikkei however, rose 2.73%. Europe was in positive territory earlier this morning. And here in the US, we’re currently trading lower.
Here’s what I’m focused on this morning:
Merck (MRK):
This company really ploughed (believe it or not, that’s a pun, referencing its planned combination with Schering-Plough (SGP)) through the second-quarter estimate. Excluding items, it put up $0.83 -- much better than the $0.77 analysts had been figuring on. It beat on the revenue line, too.
Some comments:
1. This is probably one of the most under-appreciated stories right now in pharmaceuticals. The company is solid as a stand-alone, but in combination with Schering (assuming the deal is completed) it will be even more powerful. The potential for cost savings there is awesome.
2. Note that Schering reported a better-than-expected quarter, too -- a good sign, given the planned marriage.
3. The following lines in the release also caught my eye as positives: “The company reiterated its expectations for 2009 non-GAAP EPS to be between $3.15 to $3.30, excluding certain items, and reaffirmed its 2009 GAAP EPS range of $2.84 to $3.09.” “Merck said it is reaffirming its guidance for full-year 2009 revenue (as reported by Merck & Co., Inc.) of $23.2 billion to $23.7 billion.” 4. Although the futures are mixed as I’m writing this, I think the stock gets a goose today. Frankly, this stock should be trading at no less than $35, given the above 2009 company outlook.
Caterpillar (CAT):
Let’s look at the scoreboard, shall we? Check out the company’s second-quarter results. Excluding items, it put up a hefty $0.72, which was a country mile north of the $0.22 the Street had been expecting. Note, however, that its top-line number came in a little light.
The following paragraph in the release also caught my eye as a positive:
“The company is updating its outlook for 2009 by tightening the sales and revenues range and improving profit expectations. For sales and revenues, the range has been tightened to $32 billion to $36 billion. The 2009 profit outlook is a range of $0.40 to $1.50 per share including redundancy costs of about $0.75 per share. Excluding redundancy costs, profit is forecast to be between $1.15 and $2.25 per share.” I think the stock deserves (and is going to get) a nice bump up in early trading. But I’d be reluctant to chase it too high. Again, this was great news, but what’s it going to pull out of its sleeve next? And what about that apparent revenue miss? You can see my previous take on Caterpillar here.
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