Merck’s Full Year Guidance Disappoints Investors But Retail Pins Hopes On $3B Cost-Cutting Plan

Merck & Co., Inc. (MRK) on Tuesday narrowed its full-year earnings outlook and announced a restructuring programme aimed at cost savings, dragging down shares in the pre-market session.

Shares of the company traded 4% lower in the pre-market session at the time of writing. On Stocktwits, retail sentiment around Merck is trending in the ‘bearish’ territory over the past 24 hours, while message volume rose from ‘low’ to ‘high’ levels.

The company now expects full-year worldwide sales in the range of $64.3 billion and $65.3 billion, down from its previous guidance of $64.1 billion to $65.6 billion.

The company also lowered its adjusted earnings per share guidance to between $8.87 and $8.97, lower than its previous estimate of $8.82 to $8.97.

The revised guidance includes a revised negative impact of foreign exchange and $200 million costs related to tariffs, the company said.

Merck on Tuesday also said that it has approved a new restructuring program under which it expects to eliminate certain administrative, sales, and research and development positions.

However, the company will continue to hire employees into new roles, it said, without detailing how many workers would be terminated or how many new employees it intends to hire.

The company will also reduce its global real estate footprint and optimize its manufacturing network, it said, while reiterating its investments in U.S. manufacturing.

These restructuring actions are expected to result in annual cost savings of about $1.7 billion, which will be realized substantially by 2027-end, Merck said.

The restructuring is part of the company’s multiyear optimization plan expected to achieve $3 billion in annual cost savings by the end of 2027. This will be reinvested to support new product launches and its pipeline across multiple therapeutic areas, the company said.

“Today, we announced a multiyear optimization initiative that will redirect investment and resources from more mature areas of our business to our burgeoning array of new growth drivers, further enable the transformation of our portfolio, and drive our next chapter of productive, innovation-driven growth,” said Merck CEO Rob Davis.

A Stocktwits user expressed glee about selling their holdings in the company yesterday with slight gains.

Another, however, expressed hopes for the company’s cost-cutting plans.

For the second quarter, the company reported sales of $15.81 billion, below an analyst estimate of $15.87 billion, according to data from Fiscal AI. The drop in sales was spurred by a 55% reduction in sales for the company’s human papillomavirus vaccine Gardasil.

The company’s blockbuster cancer drug Keytruda’s sales, however, rose 9% to $7.96 billion, accounting for over 50% of the company’s total sales in the three months through the end of June.  

Adjusted earnings of the company came in at $2.13 in the period, down from the $2.28 reported in the second quarter of 2024, but above an expected $2.03.

Merck stock is down by about 16% this year and by 34% over the past 12 months.

Read also: UnitedHealth Stock Slides Pre-Market On Disappointing Full-Year Guidance, Q2 Earnings: But Retail Expects A Bounceback

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