Merck and Co. Inc. (NYSE:MRK) is set to report FQ4 2013 earnings before the market opens on Wednesday, February 5th. Merck is one of the largest pharmaceutical companies in the world. This January other companies in the pharmaceutical and biotech industry, including Amgen (NASDAQ:AMGN) and Bristol-Myers Squibb (NYSE:BMY), have already posted stronger than expected earnings. Merck's stock is up about 16% this quarter and expectations are high for this quarter. Here's what investors are expecting Merck to report.
The information below is derived from data submitted to the Estimize.com platform by a set of Buy Side and Independent analyst contributors.
The current Wall Street consensus expectation is for Merck to report 89c EPS and $11.353B revenue, while the current Estimize.com consensus from 12 Buy Side and Independent contributing analysts is 90c EPS and $11.363B revenue. This quarter the buy-side as represented by the Estimize.com community is expecting Merck to beat the Street's expectations on both profit and revenue.
Over the previous 6 quarters the consesus from Estimize.com has been more accurate than Wall Street in forecasting Merck's profit everytime and twice in predicting revenue. By tapping into a wider range of contributors including hedge-fund analysts, asset managers, independent research shops, students, and non professional investors Estimize has created a data set that is up to 69.5% more accurate than Wall Street, but more importantly it does a better job of representing the market's actual expectations. It has been confirmed by an independent academic study from Rice University that stock prices tend to react with a more strongly associated degree to the expectation benchmark from Estimize than from the Wall Street consensus.
The magnitude of the difference between the Wall Street and Estimize consensus numbers often identifies opportunities to take advantage of expectations that may not have been priced into the market. In this case we are seeing a smaller differential compared to recent quarters.
The distribution of estimates published by analysts on the Estimize.com platform range from 89c to 92c EPS and $11.244B to $11.491B in revenues. This quarter we're seeing an average distribution of estimates compared to previous quarters.
The size of the distribution of estimates relative to previous quarters often signals whether or not the market is confident that it has priced in the expected earnings already. A wider distribution of estimates signaling less agreement in the market, which could mean greater volatility post earnings.
Throughout the quarter the EPS consensus from Wall Street fell from 91c to 89c while the Estimize consensus returned to its starting point at 90c. Wall Street lowered its revenue consensus from $11.526B to $11.353B while the consensus from the Estimize community consensus fell from $11.451B to $11.363B. Timeliness is correlated with accuracy and declining analyst expectations going into a report are often a bearish indicator.
The analyst with the highest estimate confidence rating this quarter is sudanharry, who projects 89c EPS and $11.450B in revenue. In the Winter 2014 season sudanharry is rated as the 87th best analyst and is ranked 403rd overall among over 3,750 contributing analysts. Estimate confidence ratings are calculated through algorithms developed by deep quantitative research which looks at correlations between analyst track records and tendencies as they relate to future accuracy. In this case, sudanharry is forecasting that Merck will report in-line with Wall Street on profit but exceed on revenue.
Over the previous two quarters Merck has beat the Street on profit but missed Wall Street's consensus on revenue. This quarter contributing analysts on Estimize.com are predicting that Merck will follow suit with Bristol-Myers Squibb and Amgen by beating Wall Street expectations on both the top and bottom line.