Merck & Co. (NYSE: MRK) – Comprehensive Stock Research Report (MRK) | Research Report

📊 Merck & Co. (NYSE: MRK) – Comprehensive Stock Research Report As of May 20, 2025

🧾 Company Overview

Merck & Co., Inc., headquartered in Rahway, New Jersey, is one of the world’s oldest and most respected pharmaceutical companies, tracing its roots back to 1891. With over 130 years of experience, Merck has grown into a global healthcare leader known for its innovation in vaccines, oncology, infectious diseases, and cardiometabolic therapies.

Leadership & Management Style: Led by CEO Robert Davis, Merck's executive team combines scientific rigor with disciplined capital allocation. The leadership emphasizes long-term shareholder value, heavy R&D reinvestment, and proactive adaptation to macro and regulatory environments.

Why MRK Matters to Investors:

Best-in-class oncology drug: Keytruda (~45% of sales)
Consistent free cash flow generation (~$18B)
Strategic manufacturing shift to mitigate geopolitical risks
Commitment to dividends and growth through innovation

🧠 Executive Summary

Merck combines resilient financials, a leading oncology franchise, and a proactive strategy amid macro uncertainties. The near-term headwinds from tariffs and Gardasil shipment issues are outweighed by a long-term robust pipeline and execution-focused leadership.

💡 Investment Thesis

Strength	Description
Valuation	Undervalued with P/E 11.24, PEG 0.77
Earnings Growth	EPS projected to grow 16.5% in 2025
Free Cash Flow	$18.1B supports innovation and dividends
Dividend	Stable, 4.2% yield with 14 years growth
Oncology Pipeline	Keytruda remains the crown jewel
Tariff Resilience	$200M tariff hit absorbed without guidance cut

📈 Key Metrics Snapshot

Current Price: $78.98
P/E Ratio (TTM): 11.24
Forward P/E: 8.58
PEG Ratio: 0.77
Dividend Yield: 4.2%
Free Cash Flow (TTM): $18.1B

📊 Key Financial Highlights

Metric	Q1 2025	Q1 2024	YoY Change
Revenue	$15.5B	$15.8B	-1.9%
GAAP EPS	$2.01	$1.87	+7.5%
Non-GAAP EPS	$2.22	$2.07	+7.2%
Free Cash Flow	$1.17B	$1.5B	-22%

🔮 Forward Financial Estimates

Year	Revenue ($B)	EPS	Forward P/E
2025	64.9	$8.95	8.8
2026	68.5	$9.60	8.2
2027	72.0	$10.20	7.7
2028	75.5	$10.80	7.3

🏭 Industry Landscape

Merck operates in a globally competitive pharmaceutical landscape dominated by peers like Pfizer, Johnson & Johnson, and Bristol-Myers. Its leadership in oncology and expanding pipeline in immunology, HIV, and cardiometabolic areas give it a distinct edge.

🧨 Strategic Risk Analysis

🇺🇸 Trump Tariffs (April 2025)

Impact Area	Description	Estimated Effect
Gardasil in China	Shipment halt amid geopolitical tension	~$200M loss
API Costs	Input cost inflation due to China tariffs	$300–500M/year
Supply Chain	Disruption across Asia/Canada/Mexico	Medium Risk

🏛 Trump Healthcare Policies

Policy	MRK Impact
MFN Pricing	High pressure on oncology margins
Drug Importation	Threat to U.S. pricing power
Tax Repatriation Holiday	Positive cash repatriation boost

🔬 Keytruda Patent Cliff

Metric	Detail
Revenue	~$26B (45% of total)
US Patent Expiry	2028
EU Patent Expiry	2029
Risk	50–70% drop post-LOE

Mitigation:

SubQ Keytruda launch (Sept 2025)
15+ new cancer indications
Combination therapies

🔬 Pipeline Execution Strategy

Drug	Indication	Status
WinRevair	Pulmonary Hypertension	Marketed
Cafaxib	Pneumococcal vaccine	Rollout underway
Doravirine + Zolotrovir	HIV	Phase 3 submitted Q2 2025
Enlicitide	Cardiovascular	Phase 3, 2025 end data
SubQ Keytruda	Oncology	FDA review Sept 2025

💵 Business Development

Active bolt-on M&A and licensing strategy
Focus on late-stage biotechs with strategic alignment in oncology, immunology, and specialty care

⏱ Short-Term Outlook (1–2 Years)

Catalysts:

Winrevair rollout
Keytruda lifecycle extension

Risks:

Trade policy volatility
Competitive pressure

Verdict: Buy

📈 Long-Term Outlook (3+ Years)

Growth Drivers:

Oncology expansion
Late-stage pipeline monetization
Global diversification

Risks:

Keytruda LOE
Regulatory changes

Verdict: Strong Buy

🧩 Peer Valuation Comparison

Company	P/E	Fwd P/E	Dividend Yield
MRK	11.24	8.58	4.2%
Pfizer	12.5	9.3	7.2%
J&J	15.2	13.1	3.2%
BMY	9.8	8.0	5.1%

🏛 Insider & Institutional Sentiment

Institutions are accumulating MRK shares
Insider sales negligible, suggesting confidence

📉 Valuation & Intrinsic Value

DCF Estimate: ~$95/share

Assumes 5% FCF growth, 7% WACC

Forward P/E Discount:

MRK: 8.58 vs Industry Avg: 12

💰 Dividend Snapshot

Dividend: $3.24 annually
Yield: 4.2%
Payout Ratio: 47%
Growth: 14 consecutive years

🌱 ESG & Shariah Compliance

ESG: A- (MSCI)
Shariah: Generally compliant, but review detailed screens

📌 Summary & Strategic Outlook

Challenge	Merck’s Response	Investor Takeaway
Tariffs	Reshoring supply chain	Near-term costs, long-term gain
Policy Pressure	Advocating reform, maintaining innovation	Requires vigilance
Keytruda LOE	Lifecycle extension, new indications, pipeline	Execution is key
Gardasil Weakness	Regional slowdown, male HPV upside	Moderate impact

🧾 Final Investment Summary

Short-Term: Buy
Long-Term: Strong Buy
Strategic leadership, undervalued pricing, and a blockbuster-rich pipeline make MRK one of the most balanced large-cap healthcare investments in today’s market.