NEW YORK (CNN/Money) - Shares of drugmakers Merck & Co. and Schering-Plough Corp. enjoyed gains Thursday after both companies hit Wall Street earnings targets and didn't spook investors with any bad news.

Merck (MRK: up $1.52 to $56.57, Research, Estimates) is going through what it calls a "transition year" of flat earnings compared to 2001, with patent expirations hurting revenue and a need for greater research and development outlays hurting the bottom line.

Schering-Plough (SGP: up $1.28 to $30.54, Research, Estimates) has been plagued by regulatory concerns about its manufacturing plants and is facing the expiration of the patent for its blockbuster allergy drug Claritin.

But both companies were true to their first-quarter earnings guidance and did not lower guidance for future periods.

"Drug sector stocks are so washed out now that when companies deliver earnings that meet expectations, even low expectations, that's seen as a relief," said analyst Len Yaffe of Banc of America Securities.

Yaffe said shares of U.S. drugmakers typically trade at a 30 percent premium to firms in the S&P 500 index , based on their stock prices as compared to annual company earnings per share. But the drug sector is now trading at a bare bones 2 percent premium, he said.

Merck reported a first-quarter net profit of $1.63 billion, or 71 cents per diluted share, compared to $1.66 billion, also 71 cents per diluted share, in the year-ago period.

Sales edged up just 7 percent from the first quarter of 2001 to $12.17 billion, with sales of its top drug, cholesterol treatment Zocor, rising 6 percent to $1.6 billion.

On average, analysts surveyed by First Call were expecting earnings of 71 cents per share and sales of $12.33 billion.

Forecasts were cut last December when Merck shocked Wall Street by warning of flat earnings growth for 2002 due to generic competition for drugs to treat high blood pressure, ulcers and high cholesterol.

The company said Thursday it is still comfortable with second-quarter earnings forecasts of 75 to 78 cents per share, with flat earnings for all of 2002 compared to 2001, and with double-digit earnings-per-share growth in its core pharmaceuticals in 2003.

Schering-Plough said earnings rose 6 percent, to $600 million, or 41 cents per share.

The results, driven by skyrocketing sales of its hepatitis C medicines and moderate growth of its allergy treatments, matched analyst expectations.

"Schering-Plough is hanging in there," said Raymond James analyst Mike Krensavage of the company's first-quarter earnings.

Sales of its Intron, Rebetol, and Rebetron drugs for hepatitis C vaulted 71 percent, to $556 million, as demand grew for a treatment against the life-threatening viral liver disease. U.S. regulators recently cleared a more effective and longer-acting form of Rebetron for hepatitis C that has proven immensely popular among doctors and patients.

The hepatitis C product line helped offset declining sales of Claritin, which slumped 8 percent, to $659 million. The company's newest allergy drug Clarinex ate into its market share, capturing sales of $85 million in the first quarter.

Schering-Plough, which is counting on U.S. regulators to accept its steps to correct plant quality control problems, said its outlook remains positive.

Looking ahead, the company said it expects to achieve 2002 earnings-per-share growth in the "low double-digits" percentage range.  

-- from staff and wire reports