Why Merck & Co. (MRK) Stock Is Up In Pre-Market Today

NEW YORK (TheStreet) -- Shares of Merck & Co. Inc. (MRK) are up 1.08% to $57.29 in pre-market trade on Tuesday after the company released its first quarter 2014 earnings report.

The global health care company reported net income was $1.70 billion, or 57 cents per share during the first quarter 2014, compared to the $1.59 billion, or 52 cents per share reported during the same quarter in 2013.

Merck earned 88 cents per share, excluding special items beating  analysts expectations of 79 cents per share, according to Thompson Reuters.

Global revenue for the U.S. drug maker decreased 4% to $10.26 billion during the first quarter 2014, compared to the $10.67 billion reported during first quarter 2013.

The company said the decrease in revenue was due to the increase in generic competition for its allergy and asthma medication, Singular.

Wall Street expected the company to report revenue of $10.44 billion, Thomson Reuters reported.

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

"We rate MERCK & CO (MRK) 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, 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 -22.12%.
  • 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, MRK's net profit margin of 6.89% is significantly lower than 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 1.4%. 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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