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Merck & Co. (MRK - Free Merck Stock Report) the second-largest drugmaker in the United States and Dow-30 component, reported better-than-expected third-quarter results. Excluding one-time items, the company earned $0.94 a share in the term, surpassing our estimate of $0.88 and up about 10% from the comparable period in 2010. Revenues climbed 8%, to $12.02 billion, bolstered by strong gains in the pharmaceutical segment. Merck's diabetes medication Januvia saw sales rise 41%, to $846 million, while Gardasil, Singulair, and Janumet all experienced double-digit volume growth. For 2011, management has once again narrowed its earnings guidance range, raising the low end from $3.68, to $3.72. Merck now estimates share net to be in the range of $3.72 to $3.76.

Animal Health operations exhibited strong growth during the period as sales increased 20%, to $826 million. Gains were recognized across all segments led by higher sales of cattle, swine, and poultry products. Increased contributions from the animal health business will be essential in filling the aforementioned top-line void left by Singulair next year. The company will be relying considerably on the success of new product launches (i.e. Juvisync and Victrelis) to help lighten the blow, as well.

In order to prepare for the 2012 patent loss of its top-selling product Singulair, Merck will likely continue to implement its cost-cutting strategy in the coming quarters. Back in July, the company announced it would be reducing its workforce by 12%-13% (12,000 to 13,000 positions) by 2015, expanding a restructuring program that slashed 11,500 positions in 2010.

Upon announcement of its earnings, shares of Merck & Co. rose about 2% in midday trading. The issue holds superior rankings in regard to Safety (1), and Financial Strength (A+). An attractive dividend yield (4.6%) offers some downside protection.

About The Company: Merck & Co., Inc., is a leading manufacturer of human and animal health care and specialty chemical products. Important products include Singulair (asthma); Vytorin, Zocor (cholesterol-lowering agents); Fosamax (osteoporosis); Crixivan (HIV/AIDS); Vasotec, Prinivil (angiotensin converting enzyme (ACE) inhibitors for high blood pressure and angina); and Prilosec (gastro.). The company acquired Medco in November of 1993 and spun it off again in August of 2003. It acquired Schering-Plough in 2009.

At the time of this article’s writing, the author did not have positions in any of the companies mentioned.