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Friday, 07/11/2003

Growing Healthier Over Time
By Nich Sheldon
MRK - Merck & Co.

Company Description

Merck & Co., Inc. is a leading research-driven pharmaceutical products and services company. Merck discovers, develops, manufactures and markets a broad range of innovative products to improve human and animal health, directly and through its joint ventures.

[Source: Company Website]

Reasons to Invest:

While searching through DRIP candidate, after DRIP candidate, after DRIP candidate we believe that we have found a company with sound management, stable financial performance and growing earnings. Merck & Co. (MRK) has been one of the best performers in the Pharmaceutical Index (DRG) over the past four weeks (ranked 84th out of 99 - 99 being the best price performer in the index). Their sales rose 10% in the first quarter to $13.39 billion and their net income rose 5% to $1.71 billion. Sales of ZOCOR, VIOXX, FOSAMAX, COZAAR, HYZAAR and SINGULAR are a direct reflection of these results.

The Pharmaceutical Index has been headed downstream lately as bulls have been seeking profits. However, the bounce off of the 200-DMA today might be a sign of new bulls and fresh faces. If the index continues to bounce off its 200-DMA - as it has done numerous times over the past four months - this could spark a nice fire under MRK, sending the stock higher. In perusing the major Drug stocks, shares of MRK really caught our attention due to its own breakout from a long-term bullish wedge that has been building since last July, 2002. In mid-June (last month) a nice bull flag consolidation pattern was starting to take shape. MRK Broke out over resistance - just over 60 - and that should now hold as strong support, backed by the 20-DMA at $60. While this company may show signs of weakness right now, it appears that it could be ready for another bullish breakout soon and right now would be the ideal time for an entry point.

In respects with Growth Rates MRK has an 8.54 sales percentage estimate over the next year, 16.55 over the next three years, and 16.99 for the next five years. Their EPS percentage estimate is 0.13 for the next year, 8.62 over the next three years and 10.95 for the next 5 years. Merck's dividend percentage estimate is 2.92 for the next year, 8.63 for the next three years and 10.78 over the next five years.

Another attractive feature of this company is the fact that they have a dividend payout ratio of 44.18 which is comparatively nice to the industry's payout ratio of 40.72, the sector's payout ratio of 24.03 and the S&P 500's 26.69. Merck & Co. yields a 2.36% dividend and an annual dividend of $1.44.

When one considers all of these factors it is easy to recognize hat a burst to the upside is possible for MRK. We could see this stock hitting $75 before year-end but the more conservative estimate would $68. Maybe if we take our vitamins this drug stock's price action will continue to grow healthier over time.

Until Next Week,
Nich Sheldon

Broker Recommendations

Strong Buy:      3
Buy:             1
Hold:           20
Sell:            4
Strong Sell:     0

DRIP Information:

Shares to Qualify = 1
Auto-reinvestment = Yes
Accept Foreign Accounts: Yes
Temper Enrollment:  Yes

Min/Max Investment = $50 to $50,000/year

Reinvestment Fees - 

Dividend investment fees: 4% to $2 + 1c/share
Cash investment fees: $5 + 1c/share
Auto reinvestment fees: $2 + 1c/share

Transfer Agent:

Wells Fargo Bank
888-291-3713

Corporate Headquarters:

P.O. Box 100, One Merck Drive
Whitehouse Station, NJ 08889 
Phone: (908) 423-1000
Fax: (908) 735-1253



 
 

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