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Earnings: What’s in the Pipeline for PFE and MRK?

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May 2, 2016
PFE MRK earnings preview

Earnings season is starting to wind down and two of the world’s largest drug makers are up this week.

Pfizer (PFE), the world’s biggest pharmaceutical company by revenues, is still stinging from its failed $160 billion inversion deal to purchase fellow drug maker Allergan (AGN) and move its headquarters to Ireland. Last week, executives defended the decision to shareholders who lambasted the company at its annual meeting, according to media reports. Earlier, the Treasury Department rejected the proposed merger between PFE and AGN.

Also last week PFE forked over $784.6 million to settle a 14-year-old lawsuit involving its Wyeth unit and overcharges to the government for drugs used for acid-related damage to the esophagus. That, and other issues, will likely be top of mind for investors when the pharma giant reports earnings before the market opens Tuesday.

Analysts reporting to Thomson Reuters are looking for earnings of $0.55 a share, up nearly 8% from the year-ago period. Revenues are forecast to grow 10% to $12 billion.

Short-term options traders have priced in a potential 2% share price move in either direction around the earnings release, according to the Market Maker Move indicator on the thinkorswim® platform by TD Ameritrade.

Going into earnings the May 33-strike puts have seen active trading along with the May 33-strike calls. (Please remember past performance is no guarantee of future results.)

Note: Call options represent the right, but not the obligation, to buy the underlying security at a predetermined price over a set period of time. Put options represent the right, but not the obligation, to sell the underlying security at a predetermined price over a set period of time. 

PFE earnings preview

FIGURE 1: PFE’S SLOW AND STEADY CLIMB.

Since bottoming out in early February, PFE shares have been crawling up, gaining more than 14%. Chart source: thinkorswim® by TD Ameritrade. Data source: Standard & Poor’s. Not a recommendation. For illustrative purposes only. Past performance does not guarantee future results.

Did Merck’s Busy Quarter Beat Expectations?

Merck (MRK) had a busy quarter with a handful of approvals by the U.S. Food and Drug Administration for drugs tied to diseases ranging from hepatitis C to Hodgkin lymphoma. Did these products produce any income? Investors will want answers to these questions and more when MRK reports earnings results after the markets close Wednesday.

At Thomson Reuters, analysts are pegging a per-share profit that is flat compared with the year-ago period at $0.85. Revenues are projected to edge up to $9.5 billion from $9.4 billion last year.

 Short-term options traders have priced in a potential 3% share price move in either direction around the earnings release, according to the Market Maker Move indicator.

Going into earnings the May 55-strike puts were active in the last week along with the May 55-strike calls. 

MRK earnings preview

FIGURE 2: HOW IS MRK MANAGING?

Up and down and up and down is how MRK’s share price has managed to gain 13% since bottoming in February this year. Chart source: thinkorswim® by TD Ameritrade. Data source: Standard & Poor’s. Not a recommendation. For illustrative purposes only. Past performance does not guarantee future results.

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