Merck & Co. Inc. (NYSE: MRK) delivered a solid earnings report before the market opened on July 30, 2024. However, the stock was down over 4% in early trading after the company cut its full-year earnings forecast. The pullback comes as MRK stock is up 17% in 2024. If you look beyond the headline numbers, this could be a good buy-the-dip opportunity.  

First, the good news. Merck delivered a double beat with revenue of $16.11 billion, beating estimates for $15.89 billion. The biopharmaceutical company also delivered earnings per share (EPS) of $2.28, which was 6.3% higher than the expected $2.15 EPS.  

A key reason for the beat came from continued strength from its blockbuster oncology drug, Keytruda. Sales of Keytruda were up 16% to $7.3 billion, 44% of the company’s quarterly revenue. The company also raised its sales guidance for the year to a range of $63.4 billion to $64.4 billion.  

However, the company lowered its profit outlook to between $7.94 and $8.04 EPS. It is forecasting a one-time charge of around $1 billion for its acquisition of EyeBio.  

Looking Beyond Keytrudra 

Keytruda is Merck’s signature oncology drug. It’s also a significant driver of revenue and profits for the company. However, as AbbVie Inc. (NYSE: ABBV) faces with its blockbuster drug, Humira, Keytruda is running up against a loss of patent protection. By 2028, the company will face biosimilar competition for Keytruda. 

That seems like a long time, but for investors in the biopharmaceutical sector, it’s right around the corner. That's because even when a drug successfully makes it into a Phase 3 clinical trial, it can take up to four years for the drug to complete that trial.

That's why investors want to see a plan for how Merck plans to replace that revenue. The company has high hopes for Winrevair, a first-in-class activin signaling inhibitor for treating pulmonary arterial hypertension (PAH). This rare disease primarily affects women between 30 and 60. Currently, PAH has a mortality rate of 40% in five years. Winrevair was approved by the FDA in March 2024 and is meant to be given every three weeks.   

Merck is Building From Its Strength 

Merck is a recognized leader in oncology and vaccines. But with Winrevair, it’s beginning to branch out into areas like cardiovascular-metabolic disorders. The company also has a GLP-1 drug in Phase 2 trials. The drug was granted fast-track approval by the U.S. Food & Drug Administration (FDA) for the treatment of fatty liver disease.  

Both of these drugs complement Merck’s deep pipeline that includes up to 80 candidates. This includes an RSV candidate who recently met its main goals in a mid-to-late-stage trial. 

MRK Stock Offers Good Value and a Chance for Growth 

Merck currently trades at around 14x forward earnings. That's lower than the sector average for medical stocks, around 17x. The company also has an attractive dividend with a 2.56% yield. Merck has increased that dividend for the last 13 years. Based on the company’s history, it’s likely to issue another dividend hike in the coming quarter.  

However, value is only one reason to consider MRK stock. At various points in 2024, the stock has met resistance around $131 and $132 per share. This dip is bringing the stock down to a key support level that is matched by a reading of around 34 on the relative strength indicator (RSI).  

Analysts have yet to weigh in on the company’s earnings, but the consensus price coming into earnings was $135.36, which is now a 13% upside along with the dividend.