Analysis of Reportable Segments
Merck & Co. Inc. operates in 2 segments: Pharmaceutical and Animal Health.
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- Balance Sheet: Liabilities and Stockholders’ Equity
- Common-Size Balance Sheet: Assets
- Analysis of Geographic Areas
- Enterprise Value (EV)
- Enterprise Value to EBITDA (EV/EBITDA)
- Enterprise Value to FCFF (EV/FCFF)
- Dividend Discount Model (DDM)
- Present Value of Free Cash Flow to Equity (FCFE)
- Return on Assets (ROA) since 2005
- Analysis of Revenues
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Segment Profit Margin
Merck & Co. Inc., profit margin by reportable segment
| Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | |
|---|---|---|---|---|---|
| Pharmaceutical | |||||
| Animal Health |
Based on: 10-K (reporting date: 2025-12-31), 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).
Segment profit margins exhibited distinct trends over the five-year period. The Pharmaceutical segment demonstrated consistent growth, while the Animal Health segment experienced more volatility.
- Pharmaceutical Segment
- The Pharmaceutical segment’s profit margin began at 72.45% in 2021. A slight decrease to 70.86% was observed in 2022, followed by a recovery to 72.56% in 2023. Subsequent years showed continued improvement, reaching 77.58% in 2024 and further increasing to 78.69% in 2025. This indicates a strengthening of profitability within the Pharmaceutical segment.
- Animal Health Segment
- The Animal Health segment started with a profit margin of 35.02% in 2021, increasing modestly to 35.37% in 2022. A notable decline occurred in 2023, with the margin falling to 30.88%. The segment experienced a partial recovery in 2024, rising to 32.98%, and continued this upward trajectory with a margin of 33.54% in 2025. While showing some recovery, the Animal Health segment’s profitability remained below its 2021 and 2022 levels.
- Comparative Analysis
- A significant difference in profit margin trends is apparent between the two segments. The Pharmaceutical segment consistently outperformed the Animal Health segment in terms of profitability, and the gap widened over the period. The Animal Health segment’s margin fluctuations suggest potential challenges related to cost management or pricing pressures. The Pharmaceutical segment’s consistent gains may be attributable to successful product launches, improved operational efficiency, or favorable market conditions.
Overall, the observed trends suggest a divergence in the performance of these two reportable segments, with the Pharmaceutical segment demonstrating robust and improving profitability, while the Animal Health segment experienced more instability.
Segment Profit Margin: Pharmaceutical
Merck & Co. Inc.; Pharmaceutical; segment profit margin calculation
| Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | |
|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||
| Segment profits | |||||
| Sales | |||||
| Segment Profitability Ratio | |||||
| Segment profit margin1 | |||||
Based on: 10-K (reporting date: 2025-12-31), 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).
1 2025 Calculation
Segment profit margin = 100 × Segment profits ÷ Sales
= 100 × ÷ =
The pharmaceutical segment demonstrated consistent growth in both profitability and revenue over the five-year period. Segment profits increased from US$30,977 million in 2021 to US$45,754 million in 2025, representing a cumulative increase of 47.8%. Sales also exhibited a positive trajectory, rising from US$42,754 million in 2021 to US$58,142 million in 2025, a cumulative increase of 36.1%.
- Segment Profit Margin
- The segment profit margin experienced fluctuations throughout the period, but generally trended upward. Starting at 72.45% in 2021, it decreased slightly to 70.86% in 2022. A recovery was observed in 2023, with the margin reaching 72.56%. Subsequent years saw more substantial improvements, with the margin increasing to 77.58% in 2024 and further to 78.69% in 2025. This indicates increasing efficiency in managing costs relative to sales within the pharmaceutical segment.
The rate of increase in segment profit margin accelerated in the later years of the period. While sales growth remained relatively consistent, the margin expansion suggests successful implementation of cost control measures, pricing strategies, or a shift towards higher-margin products within the pharmaceutical portfolio. The consistent growth in both segment profits and sales, coupled with the improving profit margin, indicates a strong and healthy performance for this segment.
- Sales and Profit Correlation
- A strong positive correlation exists between sales and segment profits. As sales increased each year, segment profits also increased, suggesting that revenue growth directly contributes to profitability. However, the increasing profit margin indicates that profitability is not solely dependent on sales volume, but also on operational efficiency and pricing power.
The observed trends suggest a positive outlook for the pharmaceutical segment, with continued growth in both revenue and profitability anticipated if these patterns persist. Further investigation into the drivers of margin expansion would be beneficial to understand the sustainability of these improvements.
Segment Profit Margin: Animal Health
Merck & Co. Inc.; Animal Health; segment profit margin calculation
| Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | |
|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||
| Segment profits | |||||
| Sales | |||||
| Segment Profitability Ratio | |||||
| Segment profit margin1 | |||||
Based on: 10-K (reporting date: 2025-12-31), 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).
1 2025 Calculation
Segment profit margin = 100 × Segment profits ÷ Sales
= 100 × ÷ =
The Animal Health segment demonstrated fluctuating performance between 2021 and 2025. Segment profits initially exhibited modest growth, followed by a decline, and then a recovery towards increased profitability. Sales generally increased over the period, though not consistently with profit fluctuations.
- Segment Profits
- Segment profits experienced a slight increase from US$1,950 million in 2021 to US$1,963 million in 2022. A subsequent decrease was observed in 2023, with profits falling to US$1,737 million. Profits then rebounded in 2024 to US$1,938 million, continuing to rise to US$2,131 million in 2025, representing the highest profit level within the analyzed timeframe.
- Sales
- Sales remained relatively stable between 2021 and 2022, at US$5,568 million and US$5,550 million respectively. A moderate increase occurred in 2023, reaching US$5,625 million. Sales continued to grow in both 2024 and 2025, reaching US$5,877 million and US$6,354 million, respectively. The growth rate accelerated in the latter period.
- Segment Profit Margin
- The segment profit margin began at 35.02% in 2021 and increased to 35.37% in 2022. A notable decline occurred in 2023, with the margin decreasing to 30.88%. The margin partially recovered in 2024, reaching 32.98%, and continued to improve in 2025, reaching 33.54%. While the margin recovered from the 2023 low, it did not return to the levels observed in 2021 and 2022. The divergence between sales growth and margin recovery suggests potential changes in cost structure or pricing dynamics.
Overall, the Animal Health segment demonstrated resilience, recovering from a dip in profitability in 2023. The increasing sales trend in the later years, coupled with a stabilizing profit margin, indicates a positive trajectory for the segment.
Sales
Merck & Co. Inc., sales by reportable segment
US$ in millions
| Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | |
|---|---|---|---|---|---|
| Pharmaceutical | |||||
| Animal Health | |||||
| Total segment |
Based on: 10-K (reporting date: 2025-12-31), 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).
Overall segment sales demonstrate a consistent upward trajectory from 2021 through 2025. The Pharmaceutical segment constitutes the vast majority of total segment sales and drives the overall growth. While Animal Health exhibits growth, its contribution to the total remains comparatively smaller. A detailed examination of each segment follows.
- Pharmaceutical Segment Sales
- Pharmaceutical sales increased from US$42,754 million in 2021 to US$58,142 million in 2025. This represents a cumulative growth of approximately 36.1% over the five-year period. The most significant year-over-year increase occurred between 2021 and 2022, with sales growing by approximately 21.7%. Growth rates moderated in subsequent years, ranging from approximately 2.3% to 6.8% annually. The segment consistently represents over 70% of total segment sales.
- Animal Health Segment Sales
- Animal Health sales experienced modest growth, increasing from US$5,568 million in 2021 to US$6,354 million in 2025, a cumulative increase of approximately 14.1%. Sales remained relatively stable between 2021 and 2022, with a slight decrease observed. Growth accelerated in the later years, with increases of approximately 1.6%, 4.3%, and 8.1% between 2022 and 2025. This segment consistently represents between 11% and 13% of total segment sales.
- Total Segment Sales
- Total segment sales increased from US$48,322 million in 2021 to US$64,496 million in 2025, representing a cumulative growth of approximately 33.5%. The largest year-over-year increase was observed between 2021 and 2022, with a growth rate of approximately 18.7%. Subsequent annual growth rates ranged from approximately 3.1% to 5.9%. The growth in total segment sales is primarily attributable to the performance of the Pharmaceutical segment.
The observed trends suggest a strong and consistent performance across all reportable segments, with the Pharmaceutical segment being the primary driver of overall revenue growth. While Animal Health demonstrates positive growth, its impact on total segment sales is less pronounced.
Segment profits
Merck & Co. Inc., segment profits by reportable segment
US$ in millions
| Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | |
|---|---|---|---|---|---|
| Pharmaceutical | |||||
| Animal Health | |||||
| Total segment |
Based on: 10-K (reporting date: 2025-12-31), 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).
Segment profits demonstrate a consistent upward trajectory over the five-year period. The Pharmaceutical segment is the primary driver of this growth, while Animal Health exhibits more moderate fluctuations. Overall, the combined performance of these segments indicates strengthening financial performance.
- Pharmaceutical Segment Performance
- The Pharmaceutical segment experienced substantial growth, increasing from US$30,977 million in 2021 to US$45,754 million in 2025. This represents a cumulative increase of approximately 47.9% over the period. Growth was particularly strong between 2021 and 2023, followed by continued, though slightly decelerating, increases in subsequent years. The segment consistently represents the vast majority of total segment profit.
- Animal Health Segment Performance
- The Animal Health segment showed less pronounced growth compared to the Pharmaceutical segment. Profitability remained relatively stable between 2021 and 2023, fluctuating around US$1,950 million. A slight decline was observed in 2023, followed by a recovery in 2024 and further growth to US$2,131 million in 2025. While positive, the growth in this segment is considerably smaller in magnitude than that of the Pharmaceutical segment.
- Total Segment Profit
- Total segment profit increased from US$32,927 million in 2021 to US$47,885 million in 2025, representing a cumulative increase of approximately 45.5%. The growth rate mirrors the strong performance of the Pharmaceutical segment, with consistent year-over-year increases. The contribution from Animal Health, while smaller, adds to the overall positive trend.
The consistent growth in Pharmaceutical segment profits, coupled with the stable performance of Animal Health, suggests a robust and expanding business model. The increasing total segment profit indicates a positive trend in overall company performance.