Company Review Thursday · Merck & Co.

Company Review Thursday: Merck & Co.

In honor of Black History Month, it’s only fair to highlight a company that has an African American at the reigns. The CEO, President and Chairman of the Board of Merck & Co. since 2011 is 61 year-old Kenneth Frazier. Frazier wears a lot of hats at Merck, but that doesn’t keep him from being the Director of Exxon Mobil (since 2009), a Chairman of PhRMA and sit on the Board of so many other organizations. Another interesting thing is that Frazier did his undergraduate studies at The Pennsylvania State University and received his J.D. from Harvard Law. But outside of his personal achievement, his hard work and direction have proven to be key in making sure Merck & Co. is a leader the pharmaceutical industry.

Company Snapshot (Yahoo! Finance Data)
Name:  Merck & Co. (as of close of business 2/11/2016)
Ticker: MRK
Current Price: $48.85
52 Week High Price:$ 61.70
52 Week Low Price: $45.69
Market Capitalization: $136.46B (Large Capital)
Price/Earnings (P/E Ratio): 31.31
Earnings/Share (EPS): $1.56
Dividend: $1.84/year (3.73% yield)
Industry: Healthcare
Primary Business: Drug Manufacturers

The Good

One of the great things about Merck is the fact they are so involved in HIV/AIDS treatments in Africa and China, dedicated to provide patient assistance drug programs and to get a handle on diabetes that plagues us here in the US. One of the most unique programs I’ve found while researching this company is the 10 year, $500 million initiative to lower the child birth mortality rate of mothers all around the world. They are pouring in a tremendous amount of money to find a driven solution that provides adequate prenatal care, family planning resources and proper treatments for child birth complications to  healthcare providing centers in 30 different countries.

Similar to biotechnology companies like Amgen I posted about last week, Merck has thousands on thousands of intellectual property. With licensing and certified retailers of the many brands that Merck produces, there is plenty of assets that produce significant returns. Since spring/allergy season is on the horizon, the Merck brand Claratin is definitely a money maker for those looking for relief. And since you and your pets will be spending more time outside, drugs like Bravecto to treat your pet for flees and ticks will be necessary.

A socially conscious drug manufacturing company with a hefty dividend sounds good to me.


The Bad

As with most pharmaceutical companies, some of the major bad press they get comes from the fact that prices for medicines are a lot higher than what people who need them can afford. But it was recently documented that Merck has actually taken to price war with other drug producers by offering lower prices on a commonly used drug to treat Hepatitis C. Price wars are generally really great for the consumer, not necessarily the investor who is looking for returns. But none the less I’ll take that because I believe everyone should have access to treatments they need for a quality life.

The Ugly

Unfortunately Merck is a great company whose price per share is being dragged down with this negative market. Prices currently are well below the 52 week high and for some people this may be time to buy. But for existing shareholders like me, this market really makes me understand that I probably really just invested here for the dividend. According to a the 2015 4th Quarter and full year earnings reports, sales dropped 3% year over year in the 4th quarter 2014 to 4th quarter 2015. Sales are down 6% on the year. Add that to the fact that the stock market indices have plummeted more than 10% on the year, Merck’s stock price is pretty ugly.

But let me tell you, there is some beauty in the stock market taking such a huge hit. If there is some thing that otherwise is not in your price range you would like to buy, I’d say its almost time to buy it. Also it’s tax season and I know that money is burning a hole in your pocket, so why not spend it on a company that will give you free money in return? If you don’t want to do it, I’ll do it for you. Just hand over the Benjamin’s.

Until next post folks…

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