NEW YORK (TheStreet) -- Shares of Pfizer (PFE) - Get Pfizer Inc. Report are up by 1.31% to $35.45 in early morning trading on Thursday, as the comapny enters discussions with Allergan (AGN) about a possible merger, according to a statement by Allergan.
Pfizer recently approached Allergan about a takeover that would create the world's largest healthcare group, valued at around $330 billion, Reuters reports.
An acquisition of Allergan could benefit the global bio-pharmaceutical company through lower tax rates, as Dublin-based Allergan pays a lower tax rate than does New York City-based Pfizer, the Wall Street Journal reports. Pfizer would likely benefit from Allergan's growth as well.
Potential obstacles include price, as shares of drug companies decline, possible layoffs and facility closures by Pfizer, an unclear future for Allergan CEO Saunders and the composition of a combined management team, the Journal notes.
No agreement has been reached, and the talks will not necessarily result in a deal, according to a statement.
Separately, TheStreet Ratings team rates PFIZER INC as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:
We rate PFIZER INC (PFE) a BUY. This is driven by several positive factors, 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 solid stock price performance and expanding profit margins. We feel its 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:
- 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. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 4.5%. Since the same quarter one year prior, revenues slightly dropped by 2.2%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- The gross profit margin for PFIZER INC is currently very high, coming in at 74.25%. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, PFE's net profit margin of 17.61% compares favorably to the industry average.
- PFIZER INC's earnings per share declined by 19.0% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, PFIZER INC reported lower earnings of $1.42 versus $1.65 in the prior year. This year, the market expects an improvement in earnings ($2.10 versus $1.42).
- The change in net income from the same quarter one year ago has exceeded that of the Pharmaceuticals industry average, but is less than that of the S&P 500. The net income has decreased by 20.1% when compared to the same quarter one year ago, dropping from $2,666.00 million to $2,129.00 million.
- You can view the full analysis from the report here: PFE