Merck jumps on Q3 beat, higher 2026 outlook

Merck shares rose about 5%, trading near $147, after the company reported stronger-than-expected third-quarter 2026 results and raised its full-year guidance. The stock also advanced in after-hours trading, with a gain of 3.6% following the release. The company now expects 2026 adjusted earnings of $2.77 to $2.82 per share and sales between $66.8 billion and $67.3 billion, reflecting confidence in the performance of its key medicines.

The upgraded outlook follows an earnings beat that showed Merck’s core franchises continuing to expand. Management described the company’s strategy as science-led and pointed to recent oncology data as supporting the late-stage pipeline, reinforcing the raised profit and revenue targets for the year.

For the third quarter of 2026, Merck reported adjusted earnings of $2.49 per share, surpassing analyst expectations of roughly $2.08 to $2.09 per share. Revenue for the period reached $18.09 billion, ahead of consensus estimates of $17.31 billion and up 5% from the same quarter a year earlier. Net income totaled $5.07 billion, or $2.04 per share, compared with $5.79 billion, or $2.32 per share, in the prior-year period.

Excluding acquisition and restructuring costs, adjusted earnings reflected the strength of Merck’s portfolio but also a lower adjusted operating margin of 30.7%, down from 37.7% a year earlier. Even with margin pressure, the combination of higher-than-expected revenue and solid profitability underpinned the decision to raise full-year guidance.

Keytruda remained Merck’s largest product, generating $8.6 billion in sales in the quarter. That performance exceeded analyst expectations of $7.73 billion and represented a 6% increase in franchise sales. Within that total, the newer subcutaneous version, Keytruda Qlex, contributed $830 million, its highest quarterly revenue since its 2025 launch and above estimates of $649 million.

The strength of Keytruda, including Qlex, was a central driver of the company’s overall beat on revenue and underpinned the improved earnings outlook. Management has emphasized oncology as a cornerstone of the portfolio, and said recent late-stage oncology data reduce risk in the company’s late-stage pipeline.

Beyond oncology, Merck’s newer product Winrevair, used to treat a rare lung condition, delivered $694 million in sales during the quarter. That figure marked a 93% increase from a year earlier and came in ahead of analyst expectations of $645 million, highlighting rapid uptake. Gardasil, a vaccine that helps prevent cancers linked to HPV, generated about $2 billion in quarterly sales, topping projections of $1.76 billion amid higher demand in the United States.

The company’s animal health division recorded $1.68 billion in revenue, coming in slightly below market expectations. Even so, the combined strength of Keytruda, Winrevair and Gardasil offset softness in animal health and contributed to the overall revenue outperformance and the higher full-year guidance.

Merck’s updated outlook for 2026 implies continued operational momentum following the strong quarter. The company’s raised sales forecast to $66.8 billion to $67.3 billion and EPS guidance of $2.77 to $2.82 incorporate a $400 million one-time charge tied to a licensing agreement, equivalent to $0.12 per share. Investors responded positively despite the lower year-over-year adjusted margin, focusing on revenue growth and product strength.

The company carries a market capitalization of about $347.70 billion and pays a dividend with a yield of 2.5%, alongside a three-year dividend growth rate of 5.4%. Its payout ratio stands at 111%, and the shares are trading above a reference valuation measure, indicating a rich pricing backdrop as the stock advances on the latest results.