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Biotech / Medical : Merck -- Ignore unavailable to you. Want to Upgrade?

To: Anthony Wong who wrote (1092)	12/9/1998 9:19:00 PM
From: Sonki	Read Replies (3) \| Respond to of 1580

here is some more usual gloom and doom from briefing. i expect mrk to be 180 in 12 months. but that is not incentive enuf for me to buy at this price. (MRK) 151 15/16.This is a small warning that could have a big impact. Everyone knows that 1999 earnings expectations are just too high, and Merck is one of the first big companies to confirm that. After the close Wednesday, drug giant Merck (MRK) warned that 1999 profits will be $4.85 to $4.95 per share, a bit below the current Wall Street consensus estimate of $4.97 per share. That may not sound like much, but Merck and the other drug companies are among the most reliable companies for delivering on-target earnings. They are very predictable. So, having MRK warn, even a bit, could focus attention on the fact that Wall Street earnings estimates for 1999 are simply unrealistic. Consider, for example, that Wall Street currently expects profits for the S&P 500 to rise about 18% in 1999, calculated by adding up all the individual forecasts (bottom-up calculation). This compares to what will be 3% to 5% this year (depending on the fourth quarter). Almost every economist forecasts that in 1999 the economy will slow down, so top-down forecasts for profits are well below the bottom-up forecasts. The National Association of Business Economists, for example, forecasts that in the GDP data, after tax corporate profits will be up only 1%. Most Wall Street top-down forecasts for profits are close to 7% (some are much lower). Something is wrong with this picture, and it is most probably that Wall Street simply has forecast too much profit growth for individual companies in 1999. MRK's numbers now indicate that its profits will grow about 14% in 1999, a solid performance, but less than the 16% previously expected. This is a minor shave compared to what is likely for many other companies as 1999 progresses. MRK stock may take a little bit of a hit from this news, as it certainly qualifies as a negative factor. Even with a P/E of 35, though, it won't alter investment manager's confidence in this top quality company for long. However, it could send shivers through investors that recognize that if MRK isn't going to hit those optimistic 1999 numbers, a lot of other companies won't either.