1-Star Price
PREMIUM
5-Star Price
PREMIUM
Economic Moat
PREMIUM
Capital Allocation
PREMIUM
Narrow-moat Merck KGaA released second-quarter results that were above Vara expectations and mildly increased its full-year outlook. While our 2021 expectations already largely fall within management's new outlook ranges, we may raise our fair value estimate mildly to recognize cash flows generated since our last valuation update. However, we do not expect to get close to recent share prices, which we view as rich.
Merck KGaA operates in three main segments: life sciences, performance materials, and healthcare. The life sciences segment (43% of 2020 sales) provides laboratory consumables and instruments to researchers in academia and applied fields, including the biopharmaceutical industry. In the healthcare segment (38%), Merck develops, manufactures, and sells branded pharmaceuticals with significant therapeutic concentrations in oncology, multiple sclerosis, and fertility. In its electronics segment (19%), the company offers specialty materials to manufacture a variety of products, such as semiconductors, flat-screen televisions, automobiles, and cosmetics. In 1995, the E. Merck KG family publicly sold part of the company, resulting in the current 30% public ownership of the firm.
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