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Market Update

Earnings on Tap: Merck

Restructuring efforts and its product pipeline should help offset some of the Merck's losses stemming from patent expirations.

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 Merck (MRK) is set to report its latest numbers Friday morning before the opening bell. The consensus estimate calls for earnings of $0.81 per share as compared with $0.49 reported in the fourth quarter a year ago.

Earnings in the third quarter topped Wall Street estimates but sales came in slightly lower as the company's Singulair asthma medicine lost market share to generic competition. The country's second-largest drug manufacturer reported earnings of $1.73 billion or $0.56 per share during the period on revenues of $11.49 billion.

Morningstar analyst Damien Conover thinks patent expirations are likely to be major roadblocks for the company's growth going forward, with losses in the international markets not likely to fade as fast as in the United States. That said, restructuring efforts would likely reduce costs and improve margins during the long term, helping to offset the patent expirations of high-margin products, adds Conover.

Shares of the company dropped nearly 8% in the month of December but have bounced back in the new year. The stock is up 6.3% on a year-to-date basis, and presently trades near Morningstar's fair value estimate.

Gazala Parveen does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.