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Forbes
23-04-2025
- Business
- Forbes
Will Q1 Earnings Send MRK Stock Lower?
CHONGQING, CHINA - APRIL 20: In this photo illustration, the Merck logo is displayed on a smartphone ... More screen, with the company's green-themed branding visible in the background, on April 20, 2025, in Chongqing, China. (Photo by) Merck is scheduled to release its earnings report on Thursday, April 24, 2025. Historical data suggests that MRK stock often reacts negatively to such announcements. Over the past five years, the stock has recorded a negative one-day return in 65% of cases, with a median decline of -2.4% and a maximum drop of -9.8%. While the actual market reaction will depend on how Merck's results compare to consensus estimates and investor expectations, understanding these historical patterns could offer an edge for event-driven traders. Two potential strategies emerge: first, traders can assess the probability of a negative reaction based on historical odds and position themselves before the earnings release. Second, they can analyze the relationship between immediate and medium-term returns post-announcement and adjust their positions accordingly. Current consensus estimates anticipate earnings per share of $2.14 on revenues of $15.31 billion. This compares to last year's earnings of $2.07 per share on sales of $15.78 billion. While Merck's newer drugs, Winrevair and Capvaxive, are expected to continue gaining market share, sales of Gardasil are projected to decline due to ongoing drops in China. Additionally, increased competition will likely pressure Januvia and Janumet sales. Although Keytruda remains the main growth driver, overall revenues are expected to decline in the first quarter. That said, for upside with lower volatility than a single stock, the Trefis High-Quality portfolio offers an alternative, having outperformed the S&P 500 with returns exceeding 91% since inception. See the earnings reaction history for all stocks Key observations on one-day (1D) post-earnings returns: Additional data for observed 5-day (5D) and 21-day (21D) returns post-earnings are summarized along with statistical details in the table below. MRK 1D, 5D, and 21D Post-Earnings Return A lower-risk approach (assuming the correlation is strong) is to identify the relationship between short-term and medium-term post-earnings returns and trade accordingly. For instance, if the correlation between 1D and 5D returns is highest, a trader could go 'long' for five days when the 1D post-earnings return is positive. Below is the correlation data based on both five-year and three-year histories. Note that '1D_5D' represents the correlation between one-day post-earnings returns and subsequent five-day returns. MRK Correlation Between 1D, 5D and 21D Historical Returns Occasionally, peer performance can influence a stock's post-earnings reaction, and the market may start pricing this in before the announcement. The following historical data compares Merck's one-day post-earnings returns with those of peers that reported immediately before Merck. For fairness, peer returns shown are also one-day (1D) post-earnings returns. MRK Correlation With Peer Earnings Learn more about the Trefis RV strategy, which has outperformed its all-cap stocks benchmark—a blend of the S&P 500, S&P mid-cap, and Russell 2000—to deliver strong returns. And if you prefer an upside with less volatility than a single stock like Merck, consider the High Quality portfolio, which has outperformed the S&P with returns exceeding 91% since inception. Invest with Trefis Market Beating Portfolios | Rules-Based Wealth
Yahoo
24-02-2025
- Automotive
- Yahoo
3 Magnificent S&P 500 Dividend Stocks Down 36% to 64% to Buy and Hold Forever
Like bargains? Need income? You can find undervalued income-producing stocks. Plenty of them are even familiar names found within the S&P 500 index. Here's a closer look at three such stocks that might be at home in your portfolio. There's no denying the automobile industry is undergoing multiple sea changes that don't favor Detroit's iconic names, like Ford Motor Company (NYSE: F). Not only are cars lasting longer, for example, but automobile ownership is on the decline. Fewer younger people are getting driver's licenses, opting for Uber or Lyft instead. It would also be naive to pretend Ford has become hypercompetitive within the growing electric vehicle (EV) arena. Auto information site CarEdge reports Ford's fourth-quarter U.S. market share at only 8.7%, behind Tesla and General Motors, but also behind Hyundai and Kia. Given all of this, it's not surprising that the carmaker's profits haven't really grown since the early 1990s, even if its revenue has. That's the chief reason Ford stock has underperformed since the early 2000s. Indeed, not only are shares down 64% from their early 2022 peak, they are also currently priced where they were at the beginning of 1995. There's just not a convincing argument that growth is anywhere on the horizon. Now take a step back and look at the bigger picture. Ford may not be growing much (if at all) right now, but with a forward-looking dividend yield of 6.5% based on a dependable quarterly payment of $0.15 per share, it's dishing out more than comparably risky bonds or stocks. Also note that the company has chosen to reward shareholders with the occasional special bonus dividend rather than committing to a higher dividend payment which might put it under financial strain. Although these one-off payments shouldn't be counted on by shareholders who need dividends to pay their bills, they're still income. There's also straight-up value here. While Ford's growth is tepid to nonexistent, this stock's forward-looking price/earnings ratio is a dirt-cheap 5.5 based on projected earnings. With the exception of the COVID-19-prompted disruption of 2020 and 2021, Ford's earnings proven mostly resilient of late. It's been a tough few months for Merck (NYSE: MRK) shareholders. This pharmaceutical stock's now down 36% from last March's peak, with most of this weakness coming after last September in response to a couple of rounds of disappointing quarters. Its diabetes treatments Januvia and Janumet are now facing stiff price competition, while its HPV vaccine Gardasil is running into headwinds in China. And to be fair, these are legitimate concerns. The market, however, has possibly overblown them while losing sight of the remaining potential of its flagship cancer-fighting drug, Keytruda. Although collective sales for Januvia and Janumet fell 33% last year (when including the adverse impact of changing currency-exchange rates), these diabetes treatments combined still account for less than 4% of the pharmaceutical giant's total revenue. Gardasil is a measurably bigger franchise at a little over 13% of Merck's revenue, but its sales ended up being mostly flat in 2024, overcoming at least some of its weakness in China. Conversely, Keytruda's sales improved 18% to $29.5 billion last year to make up 46% of the company's top line. And with the drug now being tested in eight additional clinical trials while more and more oncologists prescribe it, analysts believe its yearly sales could surpass $33 billion in 2027. Sure, that's when its patent protection starts deteriorating. This doesn't necessarily mean the end of Keytruda as a workhorse, though. The company can do things to extend its marketable life. In the meantime, investors are forgetting that Merck has a long history of either buying or developing new blockbusters. It acquired Keytruda, for instance, when the company acquired Schering-Plough back in 2009. In this same vein, in November it secured the rights to a promising immunotherapy being developed by China's LaNova Medicines. It's making rapid progress with Welireg as well. But what does any of that have to do with owning this dividend-paying stock forever? The point is, while it may not be a high-growth name and will likely never completely replace Keytruda's revenue, Merck has a long history of finding new ways to grow its top and bottom lines, which in turn has allowed it to raise its dividend payments for 14 years in a row. Newcomers will be plugging into it while the stock's forward-looking dividend yield stands at just under 3.9%. Finally, The AES Corporation (NYSE: AES) is a great dividend stock to buy while shares are down 64% from their late-2022 peak, which in turn has inflated its forward-looking dividend yield up to 6.7%. AES is a utility-scale power wholesaler, selling electricity to utility companies that would rather purchase it than produce it themselves. The company is expected to do $13 billion worth of business this year, capitalizing on this relatively new norm for the grid-equipped industry. But this business isn't as simple as it seems. The industry is making a transition from traditional power sources like fossil fuels to renewables such as solar and wind and even clean-energy alternatives like nuclear power. These environmentally friendly options are catching on. They're neither quick nor cheap to put in place, however, and AES was arguably too aggressive with its efforts to make this transition to renewables, taking on too much debt, beginning in 2022 when shares began their long-lived tumble. But there's still a strong bullish argument to be made here. Industry research outfit Precedence Research believes the renewable energy business is set to grow at an annualized clip of more than 17% through 2034 regardless of prevailing political policy. AES still insists its recent revenue-growth pace will persist at least until 2027. It should be accompanied by profit progress, too. And with a backlog of 12.7 gigawatts' worth of long-term contracts versus its current power production capacity of around 22 gigawatts, this optimistic outlook isn't tough to believe even if most investors aren't buying it right now -- figuratively as well as literally. This might help: While most investors are doubters right now, most analysts aren't. Despite the stock's prolonged weakness, the vast majority of the analyst community currently considers this ticker a strong buy, and it sports a consensus price target of $16.40. That's nearly 60% better than the stock's present price. The stock's dividend remains reasonably well protected by the industrywide tailwind and the strength of AES's sound management. Ever feel like you missed the boat in buying the most successful stocks? Then you'll want to hear this. On rare occasions, our expert team of analysts issues a 'Double Down' stock recommendation for companies that they think are about to pop. If you're worried you've already missed your chance to invest, now is the best time to buy before it's too late. And the numbers speak for themselves: Nvidia: if you invested $1,000 when we doubled down in 2009, you'd have $348,579!* Apple: if you invested $1,000 when we doubled down in 2008, you'd have $46,554!* Netflix: if you invested $1,000 when we doubled down in 2004, you'd have $540,990!* Right now, we're issuing 'Double Down' alerts for three incredible companies, and there may not be another chance like this anytime soon.*Stock Advisor returns as of February 21, 2025 James Brumley has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Merck, Tesla, and Uber Technologies. The Motley Fool recommends General Motors. The Motley Fool has a disclosure policy. 3 Magnificent S&P 500 Dividend Stocks Down 36% to 64% to Buy and Hold Forever was originally published by The Motley Fool
