NEW YORK (TheStreet) -- Pfizer (PFE) shares are showing volatility, though it is currently up 0.07% to $30.36 in trading on Monday, after the biopharmaceutical company issued 2014 full year guidance that was lowered due to the company's pending drug development deal with Germany's Merck KGaA (MKGAY) .
The company agreed to pay $850 million to Merck KGaA for the rights to jointly develop and commercialize the company's anti-PD-L1 antibody cancer treatment, though Pfizer could end up making additional $2 billion in regulatory and commercial milestone payments, according to the terms of the deal.
Merck KGaA shares are up 3.1% to $31.90 today as a result of the deal.
Pfizer lowered its full year 2014 EPS outlook as a result of the deal and now expects to earn between $1.40 and $1.49 per diluted share, down from its previous guidance of between $1.50 and $1.59 per diluted share.
TheStreet has further coverage of the deal here.
TheStreet Ratings team rates PFIZER INC as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:
"We rate PFIZER INC (PFE) 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 growth in earnings per share, largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels, expanding profit margins and notable return on equity. We feel these strengths outweigh the fact that the company shows weak operating cash flow."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- PFIZER INC has improved earnings per share by 7.7% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, PFIZER INC increased its bottom line by earning $1.65 versus $1.20 in the prior year. This year, the market expects an improvement in earnings ($2.25 versus $1.65).
- The current debt-to-equity ratio, 0.48, 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 2.18, 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 84.33%. Regardless of PFE's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, PFE's net profit margin of 21.56% compares favorably to the industry average.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 8.7%. Since the same quarter one year prior, revenues slightly dropped by 2.2%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- You can view the full analysis from the report here: PFE Ratings Report