Merck & Co Inc's Buy Recommendation Affirmed

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

NEW YORK ( TheStreet) -- Merck (NYSE: MRK) has been reiterated by TheStreet Ratings as a buy with a ratings score of B+. Among the primary strengths of the company is its expanding profit margins over time. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself.

Highlights from the ratings report include:
  • The gross profit margin for MERCK & CO is rather high; currently it is at 63.32%. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 10.18% trails the industry average.
  • MERCK & CO's earnings per share declined by 32.1% 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, MERCK & CO reported lower earnings of $2.00 versus $2.03 in the prior year. This year, the market expects an improvement in earnings ($3.49 versus $2.00).
  • MRK, with its decline in revenue, slightly underperformed the industry average of 2.8%. Since the same quarter one year prior, revenues slightly dropped by 4.0%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • In its most recent trading session, MRK has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Despite the stock's decline during the last year, it is still somewhat more expensive (in proportion to its earnings over the last year) than most other stocks in its industry. We feel, however, that other strengths this company displays offset this slight negative.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Pharmaceuticals industry. The net income has significantly decreased by 35.0% when compared to the same quarter one year ago, falling from $1,730.00 million to $1,124.00 million.

Merck & Co., Inc. provides various health solutions through its prescription medicines, vaccines, biologic therapies, animal health, and consumer care products worldwide. Merck has a market cap of $132.4 billion and is part of the health care sector and drugs industry. Shares are up 10.5% year to date as of the close of trading on Monday.

You can view the full Merck Ratings Report or get investment ideas from our investment research center.

--Written by a member of TheStreet Ratings Staff.

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