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Merck (MRK) Moves 8.4% Higher: Will This Strength Last?

Merck (MRK) saw its shares surge in the last session with trading volume being higher than average. The latest trend in earnings estimate revisions may not translate into further price...

This story originally appeared on Zacks

Merck MRK shares ended the last trading session 8.4% higher at $81.40. The jump came on an impressive volume with a higher-than-average number of shares changing hands in the session. This compares to the stock's 2.6% loss over the past four weeks.

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Merck’s stock rose as it and partner Ridgeback Biotherapeutics announced positive interim data from a phase III study on their oral antiviral medicine, molnupiravir. Data from the interim analysis showed that the medicine reduced the risk of hospitalization or death by approximately 50% in non-hospitalized adult patients with mild or moderate COVID-19. Following the compelling data, Merck stopped recruitment in the study and plans to soon file an application for Emergency Use Authorization (EUA) to the FDA based on its encouraging phase III study results.

This pharmaceutical company is expected to post quarterly earnings of $1.34 per share in its upcoming report, which represents a year-over-year change of -23%. Revenues are expected to be $12.43 billion, down 0.9% from the year-ago quarter.

While earnings and revenue growth expectations are important in evaluating the potential strength in a stock, empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements.

For Merck, the consensus EPS estimate for the quarter has remained unchanged over the last 30 days. And a stock's price usually doesn't keep moving higher in the absence of any trend in earnings estimate revisions. So, make sure to keep an eye on MRK going forward to see if this recent jump can turn into more strength down the road.

The stock currently carries a Zacks Rank 3 (Hold). You can see the complete list of today's Zacks Rank #1 (Strong Buy) stocks here >>>>

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