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TheStreet Open House

AstraZeneca (AZN) Stock Higher Over Pfizer (PFE) Takeover Talk As Earnings Drop

Stock quotes in this article: AZN, PFE

NEW YORK (TheStreet) -- Shares of AstraZeneca Plc  (AZN) are up 3.10% to $69.88 as Pfizer (PFE) takeover talk grows even though the biopharmaceutical company reported lower first quarter earnings.

First quarter profit excluding certain items declined 16% to $1.95 billion, or $1.17 a share, from $2.32 billion, or $1.41 a share.

Analysts expected $1.21 a share, based on the average of 14 estimates compiled by Bloomberg.

Sales were up 3% at constant exchange rates to $6.42 billion. That compares with the $6.39 billion average estimate of 16 analysts compiled by Bloomberg.

Must Read: Warren Buffett's 10 Favorite Growth Stocks

TheStreet Ratings team rates ASTRAZENECA PLC as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:

"We rate ASTRAZENECA PLC (AZN) a BUY. This is driven by a number of strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures and solid stock price performance. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The current debt-to-equity ratio, 0.45, is low and is below the industry average, implying that there has been successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.05, which illustrates the ability to avoid short-term cash problems.
  • ASTRAZENECA PLC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, ASTRAZENECA PLC reported lower earnings of $2.04 versus $4.94 in the prior year. This year, the market expects an improvement in earnings ($4.25 versus $2.04).
  • AZN, with its decline in revenue, slightly underperformed the industry average of 0.7%. Since the same quarter one year prior, revenues slightly dropped by 2.8%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period, despite the company's weak earnings results. The stock's price rise over the last year has driven it to a level which is somewhat expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
  • Net operating cash flow has decreased to $2,478.00 million or 12.99% when compared to the same quarter last year. Despite a decrease in cash flow of 12.99%, ASTRAZENECA PLC is in line with the industry average cash flow growth rate of -16.34%.
  • You can view the full analysis from the report here: AZN Ratings Report
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