MKGAF Merck KGAA (PK)

Merck KGaA (MKGAF) reported first quarter 2013 earnings per American Depositary Receipt (ADR) of $2.79, up 28.1% year over year.

Revenues for the reported quarter were up 4.4% year over year with currency movement adversely affecting revenues by 1.4%.

Segment Sales in Detail

The company operates under four divisions: Merck Serono, Consumer Health Care, Merck Millipore and Performance Materials.

Merck Serono and Performance Materials were the biggest contributors to the top line.

Merck Serono’s revenues increased 3.5% in the reported quarter, driven by strong performance in Europe. Rebif sales benefited from price increases in the US and improved performance in Europe. Erbitux sales grew organically by 6.6% in the reported quarter. Merck Serono is expected to achieve moderate organic sales growth in 2013.

The Consumer Health Care division’s revenues increased 7.9%, primarily due to strong performance in Europe. This division is expected to achieve stable sales growth in 2013.

The Merck Millipore division’s revenues went up 2.5%. Growth was driven by the Process Solutions business unit. Merck Millipore is expected to achieve moderate organic sales growth in 2013.

The Performance Materials division’s revenues jumped 9% due to strong demand for liquid crystals materials. This division is expected to achieve stable sales growth in 2013. This division has been seeing inventory buildup for the last several quarters in the display industry value chain. Merck KGaA expects this to be worked down in the latter half of the year.

Research and development (R&D) expenses grew 6.4%. The increase was mainly due to R&D investments in Merck Serono and Merck Millipore. Administration expenses and selling and marketing expenses declined 2.7% and 3.1%, respectively.

Outlook

Merck KGaA expects to achieve its 2014 targets in 2013 itself.

For 2013, Merck KGaA expects revenues in the range of €10.7–€10.9 billion. Earnings per share are expected in the range €8.50–€9.00.

Merck KGaA carries a Zacks Rank #3 (Hold). Currently, companies like Santarus, Inc. (SNTS), Jazz Pharmaceuticals plc (JAZZ) and Catalyst Pharmaceutical Partners Inc. (CPRX) look more attractive with a Zacks Rank #1 (Strong Buy).

 
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