Q2 earnings: Has Pfizer bucked declining COVID business?

In Pfizer's (PFE) second quarter results, the pharmaceutical giant reported revenue and earnings above expectations while lifting full-year outlook. Merck (MRK) has also topped estimates, raising its full-year sales guidance, but trimming its adjusted profit guidance.

Morning Brief hosts Brad Smith and Seana Smith discuss catalysts for the companies, from cancer therapies to new product pipelines.

For more expert insight and the latest market action, click here to watch this full episode of Morning Brief.

This article was written by Gabriel Roy

Video Transcript

Results from two health care giants out this morning.

Let's take a look at Pfizer, posting second quarter revenue and earnings above expectations and raising its full year outlook.

Merck also topping estimates in the second quarter.

They raised their full year sales guidance.

The company did, however, trim its adjusted profit guidance.

Here there, you're taking a look at shares of MRK, Merck and Company, down by about 3.5%.

Right now, while we're on Merca, I'll stay there for a hot second as I was taking a look at some of the segments, and it's really kind of two core segments that you think about with this business.

One is the pharmaceutical segment where they did see growth of 7% year over year.

Uh, and then the other is essentially what they call their animal health business, which we all hope the animals do well.

But at the end of the day, that was up by about 2% year over year, coming back to pharmaceutical.

It was really just driven by this growth in oncology, cardiovascular and interestingly vaccines, partially offset by some the declines in diabetes and virology in this most recent quarter.

Yeah, the black.

But are cancer drug a key true to strong sales there Really helping me the most recent quarter.

But again, when you take a look at the stock reaction here in pre market trading, we are seeing some red on the screen.

And that has to do with Brad.

Like you were saying that profit outlook, the fact that they lowered that they're coming in a bit of a surprise here to the street, they lowered it on acquisition costs and also saying that sales the HPV vaccine Gardasil missing Wall Street projections here.

So that's part of the reason that we are seeing a lower profit guidance coming out from me, flipping it over to Pfizer because we are seeing a bit of strength there.

And this was really something that the street had been waiting for for quite some time.

When you take a look at Pfizer's most recent results, a key worry here on the street over the last several quarters was declining sales when it comes to covid products.

So when you take a look at these results, the company has been working to cut costs.

They've been scrambling to stabilise their business, and it looks like they are starting to back investors with their shift in strategy.

What was driving this quarter?

You've got M and a also that new products pipeline.

That was enough to offset some of the decline that we still continue to see in their covid business.

So when it comes to the calls and what investors are looking for going forward, a lot of that is going to focus on some of that momentum from their MM and a some of that new product pipeline.

And whether or not it's going to be able to continue to offset some of the declines in the weakness that we have seen now for a couple of quarters in their covid.

Yeah, really interesting.

I think you hit the nail on the head here.

Just taking a look at the longer term chart here.

Year to date.

Hopefully and a lot of investors in this name perhaps hope that the trough is purely baked in at this point that we saw back in late April.

And so now, going forward from your larger question of where they can point investors' attention out to the future, especially if you do have to see even more of the acquisitive mindset from this larger industry and Pfizer me, two of those names that have had an A rich history.

So if you see more of that capital have to get deployed in order to make sure they're showing up more intellectual property so that they can build out their business from there, that's one of the headwind risks.

But at least as of right now, perhaps that's already been baked in from what the company has communicated to investors.

And, uh, perhaps settling in on just making sure that the acquisitions that they have made are creative to the business, at least for these next uh, 12 months here at this juncture.