Merck KGaA‘s (MKGAF) earnings per American Depository Receipt (ADR) for the fourth quarter 2011 were in line with the Zacks Consensus Estimate at $2.28, but below the year-ago earnings of $2.42. Higher operating expenses led to the decline in earnings. Full year earnings came in at $10.48 per ADR, beating both the Zacks Consensus Estimate of $10.03 and prior-year earnings of $8.93.
Revenues for the reported quarter climbed 3.42% to $3,542.1 million, surpassing the Zacks Consensus Estimate of $3,485 million. Full year revenues went up 16.0% to $14,308.9 million, also beating the Zacks Consensus Estimate of $13,668 million. All four segments of Merck KGaA contributed to the growth.
The Year in Detail
The company operates under two heads: Pharmaceuticals and Chemicals. The Pharmaceutical division, in turn, functions under two heads, Merck Serono and Consumer Health Care. The Chemical division is split into Merck Millipore and Performance Materials.
In terms of Euro, Merck Serono’s revenue increased 2.9% during the year, driven by strong performance of Rebif (up 3.4%) in the US and Erbitux (up 3.5%). Erbitux experienced growth mainly in the emerging markets.
The Consumer Health Care division’s revenues went up 5.1%, attributable to improved sales across all markets.
Merck KGaA’s Merck Millipore division’s revenue soared 48% from the year-ago period, which however included revenues from the segment only for six months. Impressive sales in the US, Latin America and Asia led to the robust growth of the division. Merck Millipore comprises of three business units – Bioscience, Lab Solutions and Process Solutions.
The Performance Materials division’s revenues inched up 1.0% during 2011, primarily due to positive currency impact. The Performance Materials division consists of Liquid Crystals business and Pigments business.
Merck KGaA recorded an 8.6% increase in research and development (R&D) expenses during the year, primarily due to progress in late-stage pipeline development.
Our View
Although, we currently have a Zacks #4 Rank (short-term Sell rating) on Merck KGaA, we are pleased with the company’s performance and believe that it is set to outperform riding on Rebif, Erbitux and Merck Millipore.
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