Why Merck (MRK) Stock Is Higher This Morning

NEW YORK (TheStreet) -- Shares of Merck & Co.  (MRK) are up 1.48% to $59.50 after the company announced that it entered into a definitive agreement to sell its Merck Consumer Care business to Bayer AG (BAYRY) for $14.2 billion.

Bayer will acquire Merck's existing OTC business, including the global trademark and prescription rights for Claritin and Afrin.

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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 solid stock price performance, growth in earnings per share, expanding profit margins and increase in net income. Although the company may harbor some minor weaknesses, we feel they are unlikely to have a significant impact on results."

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

  • Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 30.48% over the past year, a rise that has exceeded that of the S&P 500 Index. We feel that the stock's sharp appreciation over the last year has driven it to a price level which is now somewhat expensive compared to the rest of its industry. The other strengths this company shows, however, justify the higher price levels.
  • MERCK & CO has improved earnings per share by 9.6% 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 ($3.47 versus $1.46).
  • The gross profit margin for MERCK & CO is currently very high, coming in at 74.10%. 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 16.61% trails the industry average.
  • MRK, with its decline in revenue, slightly underperformed the industry average of 2.3%. Since the same quarter one year prior, revenues slightly dropped by 3.8%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly underperformed against the S&P 500 and did not exceed that of the Pharmaceuticals industry. The net income increased by 7.0% when compared to the same quarter one year prior, going from $1,593.00 million to $1,705.00 million.
  • You can view the full analysis from the report here: MRK Ratings Report
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