Merck shares jump as FY24 outlook reaffirmed

Investing.com — Shares of Merck KGaA surged after the company confirmed its outlook for fiscal year 2024 and revisions to its mid-term sales projections, particularly for its Life Science and Electronics divisions.

At 7:50 am (1150 GMT), Merck was trading 6.1% higher at €163.55.

Analysts at Jefferies noted that the company’s reaffirmation of its FY24 guidance, which aligns with consensus estimates, reassured investors amid ongoing uncertainties in the healthcare sector.

“Therefore at the group level we see the new guidance implying mid-term growth or around 4% which largely underpins Consensus in 2027 of €24.4bn (implied mid point €24.2bn) and thus we see this guidance as likely reassuring to investors,” said analysts at JP Morgan. 

Merck narrowed its mid-term sales growth target for the Life Science division to a range of 7% to 9% annually, down slightly from the previous 7% to 10% forecast. 

The adjustment reflects a more conservative view on the company’s prospects in China, which has seen slower growth. While this was largely anticipated, it is in line with market expectations. 

The decision to remove the 10% upper limit did not surprise analysts, as the company had hinted at this shift in earlier commentary. 

As per Jefferies, the Street had already priced in this slowdown, leaving limited room for upside surprises in the near term.

Electronics, on the other hand, saw its mid-term sales guidance upgraded to 5% to 9%, from a prior estimate of 3% to 6%. 

The semiconductor solutions segment continues to be a key driver, expected to represent 80% of Electronics sales by the end of 2025. 

This shift bolsters Merck’s growth outlook in the division, with analysts expecting a 10% year-on-year growth for semiconductor solutions in 2025, positioning it at the higher end of the updated guidance.

The Healthcare division’s forecast remains more cautious. Following recent setbacks in key drug trials, including the failure of xevinapant and evobrutinib in Phase 3 trials, Merck now expects only “slight growth” in the mid-term, rather than the previously anticipated low-single-digit range. 

However, the company remains focused on rebuilding its pipeline through increased in-licensing of drug candidates and is aiming to return to mid-single-digit growth following the U.S. loss of exclusivity for its multiple sclerosis drug Mavenclad in 2026.

Merck’s reiteration of its FY24 sales, EBITDA, and earnings guidance, all of which fall in line with market expectations, was another key driver of investor confidence. 

The company has indicated that M&A, particularly in Life Sciences, will remain a priority as it seeks to bolster its portfolio in healthcare.