Merck & Co., Inc. (MRK) Down, Could’ve Fallen Worse

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So what’s holding up the price of Merck Stock
With such a disastrous quarter, and an uncertain future for its lead product, why did Merck stock only fall 3%? My guess is the new $15 billion share repurchase program announced Wednesday. That’s more than 10% of Merck’s current market cap!

When Merck stock is repurchased, it artificially increases demand for the shares, driving Merck stock higher. And once the shares are retired, earnings per share increases because there are less shares in the denominator of the calculation, making the company more valuable.

Even if Merck & Co., Inc. (NYSE:MRK) wasn’t buying its stock yesterday, investors know it’ll be buying in the future — $7.5 billion over the next 12 months — which should help hold up Merck stock or, perhaps, even increase the price.

The article Merck Stock Down, Could Have Been Worse originally appeared on Fool.com and is written by Brian Orelli.

Fool contributor Brian Orelli has no position in any stocks mentioned. The Motley Fool recommends Johnson & Johnson. The Motley Fool owns shares of Johnson & Johnson.

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