Merck (NYSE: MRK) posts big Q1 profit jump on lower charges

Tallahassee, FL 4/27/12 (StreetBeat) -- Drugmaker Merck & Co. (NYSE: MRK) said Friday that its first-quarter profit jumped 67 percent despite lower-than-expected sales, due to lower spending on production, marketing and research as well as an arbitration charge a year ago.

The maker of Singulair for asthma and allergies said net income was $1.74 billion, or 56 cents per share, up from $1.04 billion, or 34 cents per share, a year earlier.

Excluding one-time items, Merck would have earned $3.04 billion, or 99 cents per share, up from $2.86 billion, or 92 cents per share, in 2011's first quarter. Analysts polled by FactSet expected 98 cents.

Revenue was $11.73 billion, up 1.3 percent from $11.58 billion a year ago. Analysts expected $11.83 billion.

Merck reiterated its 2012 profit forecast, for $3.75 to $3.85 per share, excluding one-time items.

"Our performance this quarter was driven by the solid contributions across our pharmaceutical, animal health and consumer care divisions and by our ongoing efforts to operate more effectively and efficiently," Kenneth C. Frazier, Merck's CEO and chairman, said in a statement.

The company took charges totalling $1.31 billion, or 43 cents a share, for integration of acquired businesses, reduced value to some assets and accounting adjustments to inventory.

Prescription drug sales rose 3 percent to $10.08 billion, led by Singulair at $1.34 billion and jumps of about 25 percent for diabetes pills Januvia and Janumet. They brought in a total of $1.31 billion, helping make up for generic competition continuing to slash sales of former blockbusters Cozaar and Hyzaar, for high blood presure.

Merck recently got U.S. approval to sell an extended-release version of Janumet, which combines Januvia and a widely used generic pill, metformin. But Singulair, Merck's top seller, goes off patent in August, creating another drain on revenue.

Sales of veterinary medicines and vaccines jumped 8 percent to $821 million on higher sales of pet and cattle products. Sales of consumer health products, including the Coppertone sun care and Dr. Scholl's foot care lines, rose 7 percent, to $554 million.

In last year's quarter, Merck took a charge of $500 million to end arbitration with health care giant Johnson & Johnson (NYSE: JNJ) over rights to immune disorder drugs Remicade and Simponi, blockbusters with several billion dollars in annual sales.

J&J had sold them jointly with Schering-Plough Corp., but after Merck bought Schering in November 2009, J&J sought worldwide rights to their sales. Under the arbitration settlement, Merck also gave up rights to sell the drugs in Latin America, Canada and some other regions, reducing its revenue from the two injectable drugs in the quarter by 26 percent, to $519 million.

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LargeCap Stocks to Watch Today

Tomahawk, WI 4/17/2012 (StreetBeat) -- Coca-Cola (KO), the beverage giant, is expected by analysts Tuesday to post first-quarter profit of 88 cents a share on revenue of $10.82 billion.

Health care company Johnson & Johnson (JNJ) will earn $1.35 a share in its first quarter on revenue of $16.28 billion, according to analysts.

Johnson & Johnson posts earnings before the opening bell Tuesday.

Goldman Sachs (GS) is expected by analysts to earn $3.55 a share in the first quarter on revenue of $9.45 billion.

Goldman beat the average analysts' profit view for the fourth quarter, but missed in the two preceding quarters. Meanwhile, the consensus revenue estimate is 20% below last year's reported first-quarter total of $11.89 billion.

Research In Motion (RIMM), the BlackBerry maker, is considering hiring bankers to help it weigh its strategic options.

Bloomberg reported that RIMM is considering hiring one Canadian bank and one global bank. The company had indicated a willingness to look at its strategic options during its recent earnings conference call.

Intel (INTC) reports earnings after the closing bell Tuesday.

Intel, the world's biggest chipmaker, is expected by analysts to post a quarterly profit of 50 cents a share on revenue of $12.84 billion.

UBS (UBS) is expecting an in-line, first-quarter performance from Intel, although it has a "bias" to the upside as hard disk drive supply constraints start to ease.

IBM (IBM) also reports after Tuesday's closing bell and analysts expect first-quarter operating earnings of $2.65 a share on sales of $24.8 billion.

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LargeCap Stocks to Keep an Eye on Today

Oxford, MS 9/12/2011 (PennyPayDay) – Semiconductor company Broadcom agreed to buy chipmaker NetLogic Microsystems for $3.7 billion, or $50 a share.

NetLogic shares were surging 19.1% to $37.99 in premarket trading Monday.

Healthcare and consumer products giant Johnson & Johnson did not succeed in obtaining U.S. clearance for more widespread usage of its arthritis drug Simponi.

Shares were down 0.5% to $63.30.

McGraw-Hill said Monday it would separate into two companies: McGraw-Hill Markets, which would focus on capital and commodities markets and include ratings agency Standard & Poor's; and McGraw-Hill Education, which will have a focus on education services.

Carol Bartz resigned her seat on the Yahoo! board Friday, according to a published media report.

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Where is Buffett Looking

Investment Underground ran a screen to filter picks Warren Buffett would like: sustainable business advantages producing significant free cash flows, and healthy returns on equity in excess of 10%.

They also screened for market caps larger than $10 billion in order to “move the needle,” meaning, Warren could acquire enough shares to make the investment worthwhile given Berkshire's (BRK.A) size. Investment Underground provided 12 names that are consistent with Berkshire's investment philosophy. One is a current holding (BDX) and one is a former holding (WU).

Of the 12 picks, 8 are healthcare related. Considering Buffett's ever-increasing stake in Johnson and Johnson (JNJ), any of the names in this screen are fair game for an entry by the conglomerate.

Abbott Laboratories (ABT): This pharmaceutical powerhouse yields 3.61% and has a history of raising its dividend. The company's portfolio of patent protected drugs, along its excellent nutritional and diagnostic groups and its history of strategic acquisitions have dug ABT a wide economic moat, a criterion Buffett often looks for in his investments.

Becton, Dickinson & Company (BDX): Another healthcare giant, Becton has carved out significant market share in the medical tool market. As of 9/30/2010, Buffett owns .81% of shares outstanding. And like Abbott, Becton has a long history of raising its dividend, which is among the highest in the industry (1.9%). But unlike ABT, Becton doesn't have a sea of patent protected drugs to shield it from competition and many of its products have been commoditized, creating a narrow moat for the company.

Cisco Systems (CSCO): Buffett has brought tech executives to Berkshire's board, including Susan Decker. As well, Bill Gates, Walter Scott, Jr. and lawyer Ronald Olsen are not strangers to old and new technologies. Cisco is the dominant player in data networking produces tons of cash-flow and will continue to as this growth story keeps growing.

Covidien (COV): This producer of all things healthcare is raising its quarterly dividend 11% to $.20 a share. This is the second consecutive year COV has upped its yield.

Exelon (EXC): With the largest nuclear fleet of any U.S. utility, Exelon's 11 nuclear plants generate 17% of U.S. nuclear power and constitute 80% of Exelon's generation output. This is a low risk, wide moat operation with room to run. The company has traded upwards of $85 a piece. At the time of writing, EXC trades at $40 a share and yields 5.3%.

France Telecom (FTE): FT spits off about 8 billion Euros a year in free cash flow and should continue to for the next 5 years, allowing the company to pay off its debt load of around 34 billion errors net of cash and continue to increase its dividend which yields 5.7%. FTE as well has a solid history of increasing its dividend, though it did cut it in half during 2009 due to slowed wireless and broadband growth.

Medtronic (MDT): This Company dominates the medical equipment space, holding market leading positions in heart devices, insulin pumps, and spinal products. Medtronic trades on a TTM price to earnings ratio of 10.9. Compare that to an industry P/E of 16.5, throw in a 2.5% yield, a wide economic moat, and a recent increase in Goldman's price target to $36 a share, and you have a stock that fits Berkshire's investment philosophy.

Novartis (NVS): The Swiss-based pharmaceutical maker has a healthy balance sheet and a free cash flow yield of ~ 8%. The company's healthy intellectual property portfolio has created a wide moat for itself, which will likely remain as long as Novartis can continue to fuel its late stage pipeline and keep making targeted acquisitions.

Roche Holdings (RHHBY.PK): The other big boy of the Swiss pharma giants, Roche yields 3.2% and has a solid drug portfolio and pipeline, due to the company's acquisition of Genentech in 2009.

St. Jude Medical (STJ): One of Medtronic's biggest rivals, St. Jude's maintains an economic moat thanks to its diversified product offering and its key position in the $550 million dollar vascular closure market. What's more, 45% of STJ's sales come from abroad. The company could easily trade in the $45-$50 per share range as healthcare spending recovers along with the broader economy.

Western Union (WU): Buffett has owned WU in the past. And for good reason. The company is the largest money transfer company in the world. The size of the company has proved to be an advantage as many smaller rivals have been driven out of business because of regulatory requirements they couldn't keep pace with.

Zimmer Holdings (ZMH): Shares of ZMH appear cheap considering the company's market share and demographic trends on the horizon. The company leads the hip and knee implant industry, an industry which should see solid growth as the baby boomers keep getting older.