) to underperform from neutral.
Analyst Ken Kulju says his downgrade follows the stock's 20% rally from December lows. He expects shares will continue to struggle over the balance of the year as the company faces weak growth in core domestic drug lines, and possesses only limited pipeline support following the recent loss of key new-drug development programs.
Kulju thinks Merck's $3.11 to $3.17 2004 stated guidance remains overly ambitious. He expects Merck will either adjust guidance downward in 2004 or increasingly rely on non-operating income gains to reach stated goals. He sees $2.91 2003 earnings per share, and $3.11 2004 earnings per share. He has a $49 target.