Why Pfizer (PFE) Stock Is Down Today

NEW YORK (TheStreet) -- Shares of Pfizer (PFE)  fell 0.78% to $29.94 in morning trading Tuesday after the U.S. Treasury Department and the IRS announced a plan to decrease inversion tax benefits.

Shares of AstraZeneca (AZN)  also fell 4.63% to $71.21 on Tuesday, as the U.S.-based Pfizer had made a $118 billion bid to acquire its British rival earlier this year.

The plan aims to discourage U.S. companies from moving their headquarters to other countries through mergers with foreign companies in order to take advantage of the benefits and reduce their U.S. taxes. The government structured the revisions to five sections of the tax code to make it more difficult for companies to make the tax inversion deals and to reduce the financial benefits should they do so.

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"These first, targeted steps make substantial progress in constraining the creative techniques used to avoid U.S. taxes, both in terms of meaningfully reducing the economic benefits of inversions after the fact, and when possible, stopping them altogether," said Treasury Secretary Jacob J. Lew in a statement. "While comprehensive business tax reform that includes specific anti-inversion provisions is the best way to address the recent surge of inversions, we cannot wait to address this problem."

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 a few notable 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, reasonable valuation levels, expanding profit margins, good cash flow from operations and increase in stock price during the past year. 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, 0.49, is low and is below the industry average, implying that there has been successful management of debt levels. To add to this, PFE has a quick ratio of 2.03, which demonstrates the ability of the company to cover short-term liquidity needs.
  • The gross profit margin for PFIZER INC is currently very high, coming in at 85.17%. It has increased significantly from the same period last year. Along with this, the net profit margin of 22.92% is above that of the industry average.
  • Net operating cash flow has slightly increased to $4,087.00 million or 6.71% when compared to the same quarter last year. In addition, PFIZER INC has also modestly surpassed the industry average cash flow growth rate of -0.95%.
  • Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. 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.

You can view the full analysis from the report here: PFE Ratings Report

 

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