Merck & Co. (NYSE: MRK) could cash in on coronavirus by manufacturing vaccines.
Merck (MRK) will manufacture the controversial Johnson & Johnson (JNJ) single-shot vaccine, U.S. President Joe Biden (D-Delaware) announced on 3 March 2021. Biden hopes Merck and J&J could manufacture enough vaccine for every adult in the United States by May 2021.
The contract could be lucrative because there were 255.2 million adults in the United States in 2019. However, the Johnson & Johnson (NYSE: JNJ) vaccine is controversial because it is weaker.
Merck makes controversial Vaccine
The Johnson & Johnson vaccine is 66% effective while the Moderna (NASDAQ: MRNA) vaccine is 94% effective and Pfizer/BioNtech vaccine is around 95% effective. Thus around one-third of people who get the J&J vaccine could get COVID-19. On the other hand, only around 5% of those who get the BioNTech (NASDAQ: BNTX) will catch coronavirus.
However, the J&J vaccine only requires one shot the Pfizer (PFE) and Moderna vaccines require two shots. In addition, they can store the J&J vaccine at room temperature, the others require super-cold freezers. Hence, the J&J vaccine is easier to use it but it is an inferior product.
Predictably, there are already complaints that they will dump the J&J vaccine into lower income, rural, or minority communities while the rich get the better Pfizer and Moderna products. Demagogues such as Donald J. Trump Sr. (R-Florida) will use that situation to attack Merck.
Additionally, some Roman Catholic Bishops are discouraging the JNJ vaccine’s use because they made it with cells originally taken from an aborted fetus. That will create problems if they try to distribute the vaccine in working-class Catholic (Hispanic) communities.
Thus, Merck will face condemnation and potential attacks from kooks. On the other hand, Merck could make enormous amounts of money from the vaccine.
How Much Money is Merck Making?
Merck (MRK) needs additional income because it loses money. To explain, Merck reported a quarterly operating loss of -$1.942 billion on 31 December 2020.
The quarterly operating income fell from $3.230 billion on 30 September 2020 and $2.761 billion on 31 December 2019. However, Merck reported a quarterly gross profit of $6.982 billion on 31 December 2020.
Merck reported quarterly revenues of $12.514 billion on 31 December 2020. In 2020, the quarterly revenues grew from $11.867 billion on 31 December 2019. Stockrow estimated Merck had a revenue growth rate of 5.45% in the quarter ending on 31 December 2020.
How Much Cash and Debt does Merck have?
No cash numbers for Merck (MRK) were available on 31 December 2020. However, Merck reported a quarterly operating cash flow of $2.173 billion, and a quarterly cash flow of -$3.746 billion on 30 September 2020.
Merck is borrowing money. It reported a quarterly financing cash flow of -$3.851 billion on 30 September 2020. Merck reported $26.321 billion in total debt on 31 December 2020. In 2020, Merck’s total debts grew from $22.736 billion on 31 December 2019.
However, Merck still has some value it reported $7.356 billion in cash and short-term investments and total assets of $89.80 billion on 30 September 2020. The total assets grew from $84.397 billion on 31 December 2019.
Is Merck a Good Stock?
I consider Merck (MRK) a value investment because Mr. Market paid $74.17 for its shares on 8 March 2021. During the pandemic, Merck’s share price fell from $82.97 on 4 March 2020.
I consider Merck a value investment because it is a cash-rich company with a cheap stock. Appealingly, I consider Merck an excellent dividend stock because it will pay a 65¢ dividend on 7 April 2021.
Merck’s quarterly dividend grew from 61¢ on 7 October 2020. Overall, Merck shares offered a $2.60 forward annualized dividend and a dividend yield of 3.57% on 4 March 2021.
If you are looking for a value stock that could profit from the COVID-19 pandemic, Merck (NYSE: MRK) is worth investigating. I think Merck could make enormous amounts of money by manufacturing coronavirus vaccines.
Originally published at https://marketmadhouse.com on March 8, 2021.
