Merck Aims to Extend Winning Streak as Q4 Earnings Loom, Shares Up 13% in Past Year

Investors will be watching closely Tuesday morning when Merck & Co. (MRK) unveils its fourth-quarter 2025 financial results. The report, scheduled for release before the market opens on February 3, 2026, comes on the heels of a 13% stock gain over the past 12 months—a performance that has notably outstripped the healthcare sector's average returns.

Analysts polled by FactSet expect the drugmaker to post earnings of $2.01 per share on revenue of $16.12 billion, which would represent a year-over-year sales increase of 3.1%. The consensus figures have held steady in recent weeks, suggesting confidence in Merck's operational execution despite industry-wide pressures like drug pricing negotiations.

Merck enters this earnings season with momentum, having topped profit estimates for three consecutive quarters with an average surprise of 5.1%. Historically, its shares have moved between 3% and 5% on earnings surprises, with an 8.9% surge last quarter following a significant beat.

The Keytruda Question
The central focus for analysts will be the sales trajectory and future guidance for Merck's blockbuster cancer drug, Keytruda. Quarterly sales are projected between $7.8 and $8.0 billion, but the more critical metric will be management's 2026 growth forecast. A projection below 8% could signal the drug is nearing its peak sooner than anticipated, while guidance above 10% would help assuage fears about upcoming biosimilar competition and reinforce its long-term runway.

Signs of Confidence from Within
In a notable show of faith, ten senior executives, including CEO Robert Davis and CFO Caroline Litchfield, purchased nearly $16 million in company stock on January 26 at $107.40 per share—just one week before the earnings release. This coordinated insider buying across all major divisions is often interpreted as a signal of management's confidence heading into the report.

Valuation and Outlook
Merck currently trades at a forward price-to-earnings ratio of 9.13, a significant discount to peers like Johnson & Johnson (16.42x) and Eli Lilly (27.17x). This gap reflects persistent investor concerns over Keytruda's long-term growth and the visibility of Merck's pipeline beyond its flagship drug. Success in integrating the recent acquisition of Verona Pharma and progress on a $3 billion cost-optimization program announced in mid-2025 will be scrutinized as potential catalysts to re-rate the stock.

Analyst Sentiment Mixed
While firms including Wells Fargo, Morgan Stanley, and Bank of America have raised price targets in the past month—pushing the average to $114.53, implying about 11% upside—some remain cautious. Cantor Fitzgerald maintained a neutral rating, warning that near-term guidance might fall short of Street estimates.

Market Voices: Reactions from the Street

"The insider buying is a powerful signal," says David Chen, a portfolio manager at Horizon Capital. "When the C-suite puts millions of their own money on the line days before earnings, it tells you they likely have positive news to share. The valuation discount is too steep if they can show pipeline progress."

Rebecca Shaw, an independent healthcare analyst, offers a more measured take: "The streak of earnings beats sets a high bar. The real test isn't Q4—it's the 2026 guide. With Medicare price negotiations looming, Merck needs to prove Keytruda still has legs and that the new subcutaneous formulation can drive market expansion."

A sharper critique comes from Marcus Thorne, editor of the Biotech Skeptic newsletter: "This is a one-trick pony trading on borrowed time. The entire narrative is built on Keytruda, a drug facing patent cliffs and pricing pressure. A 13% run-up in the stock feels like hope over substance. The insider buying? A classic tactic to buoy sentiment before what could be a reality check on growth."

Eleanor Vance, a retired pharmacist and long-term Merck shareholder, adds: "As a patient and an investor, I want to see the pipeline delivering. The Verona acquisition and the new Keytruda formulation are steps in the right direction, but the market needs tangible proof that life after Keytruda is being secured. The valuation suggests deep skepticism; Tuesday is a chance to start changing that story."