Merck Stock Crashes After Spinoff Plan. Is it a Buy?

merck stock chart

Merck stock (NYSE: MRK) crashed today after it missed fourth-quarter revenue estimates. It also revealed a plan to sell off/spin off its slower-growing companies.

During the fourth quarter, the adjusted Merck had a $1.16 earnings per share based on $11.87 billion in sales. The good news that its earnings exceeded the average estimate of analysts polled by Zacks Research by 2 cents.

Unfortunately, sales came in at $12.4 billion, which were below expectations. Merk’s profit was up 12% year over year and sales 9%. This is promising as it shows that leadership is making a leaner and more profitable company. Moodys continued its stable rating for the company with a A1/Prime-1 rating.

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Merk plans on spinning off its women’s health, biosimilars, and others to a new company. These divisions account for nearly 14% of its total revenue.

Traders appear not to like the plans for the spinoffs. This has caused the stock to drop by nearly 4% today.

Merck Two Pharma Company Plan

Merck plans on creating two pharmaceutical companies. The existing one will primarily focus on vaccines, hospitals, oncology, and animal health and research new products.

A crucial part of The existing Merck will be Keytruda because Strong Keytruda sales continue to drive Merck stock. Merck will keep the $2.44 per share after the spinoff.

In the fourth quarter, sales of the blockbuster cancer drug rocketed 46%, excluding the impact of exchange rates, to $3.11 billion.

The new one will partner with Samsung Bioepis to create lower-cost versions of branded biologic drugs. It will also have a broad portfolio of medicines that treat dermatology, pain, cardiovascular conditions, and respiratory issues.

The spinoff and new organization is expected to wrapped in the first half of 2021. Merck projects to achieve more than $1.5 billion in operating efficiencies by 2024.

Merck Stock Price Recommendations

Jan-07-20 Initiated RBC Capital Mkts Sector Perform $99
Oct-17-19 Resumed BofA/Merrill Neutral $90
Aug-16-19 Initiated SVB Leerink Outperform
Jul-03-19 Initiated Mizuho Buy $97
May-28-19 Initiated Goldman Neutral
May-13-19 Upgrade Atlantic Equities Neutral → Overweight
Oct-16-18 Reiterated Citigroup Buy $70 → $79
Oct-09-18 Resumed Guggenheim Buy
Apr-23-18 Upgrade Goldman Neutral → Buy
Apr-17-18 Upgrade Morgan Stanley Equal-Weight → Overweight
Apr-05-18 Upgrade Barclays Equal Weight → Overweight $62 → $64
Mar-12-18 Upgrade Leerink Partners Mkt Perform → Outperform
Feb-14-18 Reiterated Leerink Partners Mkt Perform $67 → $66
Feb-07-18 Reiterated Morgan Stanley Equal-Weight $60 → $63
Jan-16-18 Upgrade SunTrust Hold → Buy
Nov-28-17 Resumed BofA/Merrill Buy $64
Nov-24-17 Reiterated Deutsche Bank Hold $62 → $59
Oct-31-17 Upgrade Jefferies Underperform → Hold
Oct-30-17 Downgrade SunTrust Buy → Hold
Oct-30-17 Downgrade Morgan Stanley Overweight → Equal-Weight

1 Day Merck Stock Moving Averages

Name Value Action
Exponential Moving Average (5) 86.74 Sell
Simple Moving Average (5) 86.66 Sell
Exponential Moving Average (10) 87.19 Sell
Simple Moving Average (10) 86.74 Sell
Exponential Moving Average (20) 87.98 Sell
Simple Moving Average (20) 88.38 Sell
Exponential Moving Average (30) 88.27 Sell
Simple Moving Average (30) 89.33 Sell
Exponential Moving Average (50) 88.11 Sell
Simple Moving Average (50) 88.98 Sell
Exponential Moving Average (100) 86.93 Sell
Simple Moving Average (100) 86.42 Sell
Exponential Moving Average (200) 84.35 Buy
Simple Moving Average (200) 84.41 Buy
Ichimoku Cloud Base Line (9, 26, 52, 26) 88.07 Neutral
Volume Weighted Moving Average (20) 88.14 Sell
Hull Moving Average (9) 87.09 Sell

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