Merck (NYSE:MRK) earned of $0.83 per share for the second quarter, as reported today by Yahoo Finance, Briefing,com, and Bloomberg. Briefing.com also reported a 92.3 percent increase in year-over-year revenues.
But according to the press release, MRK earned $0.24 per share compared to $0.74 for the year-ago period and reduced guidance for 2010 to $3.29 to $3.39 from $3.27 to $3.41.
The discrepancy centers on GAAP (generally accepted accounting principles) vs. non-GAAP accounting. Excluding $830 million in restructuring costs for its Schering Plough acquisition and other special items, the company did earn $0.86 per share, but on a non-GAAP basis.
The 92.3 increase in revenues for the second quarter came from the combined companies, but the $0.86 per share number reported in the media was derived from earnings attributable only to Merck’s operation. It excluded acquisition costs and a mishmash of other accounting workarounds…I mean, costs and expenses.
While I fully understand the value of reporting non-GAAP earnings for one-time restructuring charges and so forth, the earnings beat and impressive jump in revenues as reported (without qualification) creates a false impression of strong performance for the period.
Reuters was one news source that got it right. And according to the Reuters report:
“A lower tax rate was a key contributor and accounted for 3 cents of the (earnings) beat” in the quarter, Sanford Bernstein analyst Tim Anderson said.
It looks like investors got it right also, as MRK shares closed down over 2 percent for the day.
Disclosure: No positions.