Why Merck (MRK) Stock Is Higher This Morning

NEW YORK (TheStreet) -- Shares of Merck & Co.  (MRK) are up 1.4% to $57.88 in pre-market trade.

The health care company's experimental hepatitis C pill produced clinical trial results positioning the drug as a strong competitor to a potential blockbuster therapy from Gilead Sciences (GILD), BloombergBusinessweek reports.

Merck's two-drug combination once-a-day pill stopped the virus in 98% of newly treated patients with few major side effects, according to a mid-stage study presented today at the European Association for the Study of the Liver in London.

The therapy from Merck will go to final-stage testing as Gilead and AbbVie (ABBV) compete to be first to market with regimens aiming to eliminate the need for interferon, an older therapy with difficult side effects, for patients with a strain of hepatitis C known as genotype 1, the publication said.

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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 largely solid financial position with reasonable debt levels by most measures, good cash flow from operations, expanding profit margins 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, 0.50, 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 1.38, which illustrates the ability to avoid short-term cash problems.
  • Net operating cash flow has significantly increased by 67.27% to $3,026.00 million when compared to the same quarter last year. In addition, MERCK & CO has also vastly surpassed the industry average cash flow growth rate of 11.22%.
  • The gross profit margin for MERCK & CO is currently very high, coming in at 76.93%. Regardless of MRK's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 6.89% trails the industry average.
  • MERCK & CO's earnings per share declined by 13.3% 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 two years. However, we anticipate this trend to reverse over 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 ($3.44 versus $1.46).
  • MRK, with its decline in revenue, slightly underperformed the industry average of 0.5%. Since the same quarter one year prior, revenues slightly dropped by 3.5%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
  • You can view the full analysis from the report here: MRK Ratings Report

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