Stock Analysis on Net
Stock Analysis on Net

Merck & Co. Inc. (NYSE:MRK)

Common-Size Income Statement 

Merck & Co. Inc., common-size consolidated income statement

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12 months ended: Dec 31, 2024 Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020
Sales 100.00 100.00 100.00 100.00 100.00
Cost of sales -23.68 -26.83 -29.37 -27.98 -32.26
Gross profit 76.32% 73.17% 70.63% 72.02% 67.74%
Selling, general and administrative -16.86 -17.47 -16.94 -19.78 -21.81
Research and development -27.95 -50.79 -22.85 -25.14 -28.25
Restructuring costs -0.48 -1.00 -0.57 -1.36 -1.20
Operating income 31.03% 3.92% 30.27% 25.74% 16.47%
Interest income 0.65 0.61 0.26 0.07 0.12
Interest expense -1.98 -1.91 -1.62 -1.65 -1.73
Exchange losses -0.35 -0.62 -0.40 -0.61 -0.30
Income (loss) from investments in equity securities, net 0.02 0.57 -2.39 3.98 2.79
Net periodic defined benefit plan credit other than service cost 0.99 0.83 0.47 0.44 0.71
Other, net 0.72 -0.25 1.15 0.53 0.26
Other income (expense), net 0.04% -0.78% -2.53% 2.75% 1.85%
Income from continuing operations before taxes 31.07% 3.14% 27.74% 28.50% 18.32%
Taxes on income from continuing operations -4.37 -2.52 -3.24 -3.12 -3.56
Net income from continuing operations 26.70% 0.63% 24.50% 25.37% 14.76%
Income from discontinued operations, net of taxes 0.00 0.00 0.00 1.45 0.00
Net income 26.70% 0.63% 24.50% 26.82% 14.76%
Net income attributable to noncontrolling interests -0.02 -0.02 -0.01 -0.03 -0.03
Net income attributable to Merck & Co., Inc. 26.68% 0.61% 24.49% 26.79% 14.72%

Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).

The analysis of the financial trends over the five-year period reveals several key insights into the company's operational and financial performance.

Sales and Cost Structure
Sales consistently represent 100% of sales by definition. The cost of sales as a percentage of sales showed a steady decline from -32.26% in 2020 to -23.68% in 2024, indicating improved cost efficiency in production or procurement over the period. Correspondingly, gross profit increased from 67.74% in 2020 to 76.32% in 2024, reflecting enhanced profitability at the gross margin level.
Operating Expenses
Selling, general, and administrative expenses decreased from -21.81% in 2020 to -16.86% in 2024, demonstrating effective control over operating expenses. Research and development expenses displayed more volatility, initially decreasing from -28.25% in 2020 to -22.85% in 2022, then spiking sharply to -50.79% in 2023 before reverting to -27.95% in 2024. This suggests a significant one-year increase in R&D investment or costs in 2023, possibly due to extraordinary projects or initiatives.
Profitability Measures
Operating income showed substantial fluctuation, starting at 16.47% in 2020, rising to a peak of 30.27% in 2022, then dropping sharply to 3.92% in 2023 before recovering to 31.03% in 2024. This pattern indicates volatility in operating performance, likely linked to the irregular R&D spending. Net income attributable to the company followed a similar trend, declining substantially in 2023 to 0.61% before rebounding to 26.68% in 2024.
Financial Income and Expenses
Interest income increased gradually from 0.12% in 2020 to 0.65% in 2024, while interest expense remained relatively stable around -1.6% to -2.0%, slightly increasing towards 2024. Exchange losses fluctuated but showed an overall decline from -0.30% in 2020 to -0.35% in 2024, with the highest loss in 2023 at -0.62%. Income from investments in equity securities displayed volatility, turning negative in 2022, then near zero by 2024.
Other Income and Expenses
Other income/expense items showed mixed trends, with "Other, net" and "Other income (expense), net" demonstrating variability and occasional negative impacts, especially a notable negative amount in 2023 for other income at -0.78%. The net effect of these items appears minor in the overall results.
Taxation and Net Income
Taxes on income from continuing operations remained relatively stable, ranging between -2.52% and -4.37%. Net income from continuing operations aligned with overall net income trends, exhibiting a sharp decline in 2023 followed by robust recovery in 2024. Discontinued operations contributed minimally, with only a small positive impact recorded in 2021.
Noncontrolling Interests
Net income attributable to noncontrolling interests was negligible throughout, close to zero, indicating minimal impact from minority shareholders on net income.

In summary, the company's financial performance over these years reflects strong gross profitability and effective cost management, tempered by volatility in research and development expenses and operating income, especially marked by the pronounced dip in 2023. The sharp swings in operating income and net income indicate that 2023 was an atypical year possibly due to extraordinary investments or costs. The subsequent strong recovery in 2024 suggests a return to more normalized profitability levels. Financial income and expenses remained relatively stable, supporting steady earnings in the face of operational volatility.