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Why Merck (MRK) Stock Is Gaining Today

Stocks in this article: MRK

NEW YORK (TheStreet) -- Merck (MRK) shares are up 0.9% to $60.26 on Tuesday following the announcement that the biopharmaceutical company would be collaborating with rival Pfizer (PFE) in a study of its immunotherapy lung cancer drug candidate.

The trials of Merck's yet to be approved pembrolizumab treatment in conjunction with Pfizer's FDA approved Xalkori treatment are expected to start next year.

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Xalkori generates $400 million a year in revenue for Pfizer while pembrolizumab is expected to be approved in the coming months.

"Evidence from early studies of pembrolizumab monotherapy together with Xalkori's proven targeted therapeutic approach provides the scientific rationale for evaluating this combination for the treatment of lung cancer," said Merck executive Eric Rubin.

TheStreet Ratings team rates MERCK & CO as a Buy with a ratings score of A. TheStreet Ratings Team has this to say about their recommendation:

"We rate MERCK & CO (MRK) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its solid stock price performance, increase in net income, largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels and growth in earnings per share. We feel these strengths outweigh the fact that the company shows weak operating cash flow."

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

  • Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. Looking ahead, unless broad bear market conditions prevail, we still see more upside potential for this stock, despite the fact that it has already risen over the past year.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Pharmaceuticals industry. The net income increased by 121.2% when compared to the same quarter one year prior, rising from $906.00 million to $2,004.00 million.
  • The current debt-to-equity ratio, 0.48, 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 1.14, which illustrates the ability to avoid short-term cash problems.
  • MERCK & CO reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, MERCK & CO reported lower earnings of $1.46 versus $2.00 in the prior year. This year, the market expects an improvement in earnings ($3.50 versus $1.46).
  • You can view the full analysis from the report here: MRK Ratings Report

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