Merck: Solid Near-Term Earnings but Muted Post-LOE Growth Keeps Rating at Hold

TD Cowen analyst Steve Scala has assigned their neutral stance on MRK stock, giving a Hold rating on January 13.

Steve Scala has given his Hold rating due to a combination of factors tied to Merck’s near- and long‑term outlook. While he views Merck as a high‑quality company, he sees limited potential for the shares to stand out within the pharmaceutical sector unless the company can significantly enhance its growth profile beyond current expectations. His analysis suggests that although valuation multiples in pharma often bottom ahead of major loss‑of‑exclusivity events, Merck’s subsequent growth rebound appears too subdued to justify a more positive stance at this time.

In the near term, Scala notes that Merck’s 2025 earnings remain solid and broadly aligned with company guidance and market expectations, supported in part by higher sales and contributions from new assets such as Ohtuvayre. However, he highlights that one‑time and acquisition‑related charges, including sizable R&D and financing impacts from deals like Cidara and Verona, will pressure reported profitability and complicate the earnings trajectory into 2026. Although he raises his price target on the back of sector‑wide multiple expansion and Merck’s buyback plans, the combination of earnings dilution, modestly trimmed sales expectations, and an uninspiring post‑LOE growth setup leads him to maintain a Hold rather than recommend the stock as a top outperformer.

Scala covers the Healthcare sector, focusing on stocks such as Elanco Animal Health, Pfizer, and Sanofi. According to TipRanks, Scala has an average return of 11.6% and a 64.82% success rate on recommended stocks.