Merck KGaA stock falls on weak Q3, soft outlook

Investing.com — Shares of Merck KGaA (ETR:) fell over 4% on Thursday following a mixed reception 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, the slight tweak to its 2024 sales outlook has sent its shares down.

“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,” said 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, noting that the EBITDA beat, largely driven by cost controls and favorable product mix in Healthcare, falls short of the more desirable topline growth from Life Science or Electronics.

Life Science sales, however, undershot projections by 2%, primarily due to a weaker performance in Life Science Services, which reported a 19% year-over-year decline. 

This was due to lumpy revenues in the contract development and manufacturing organization business, which benefited from a one-time payment in the prior year related to COVID-19 operations.

Merck’s Electronics segment continued to face headwinds, with a 3% sales miss. The demand for semiconductor materials tied to AI applications was insufficient to offset sluggish recovery in the broader semiconductor market. 

The downward revision in Merck’s full-year sales guidance, now anticipated to be at the lower end of its previously stated range, reflects potential softness in demand across its key sectors as the company navigates a complex global market environment.

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