Thesis: AI (At Least In Its Current Iteration) For Financial Analysis... Is Largely... Useless -- Merck Edition.

But I did find the goofy / freebie graphic (see derivative version at lower right), in an otherwise useless piece of fluff. . . at least interesting, as a way to think of Merck's vast financial prowess. [The company generates a 73% gross margin, or over $10 billion cash, each year now. And the flow is a quarterly set of figures.]

The AI generated content / editor was arguing that the flow meant Merck's dividend was at risk. That's preposterous, as we've said a few times before. But what it does highlight, is mostly the opposite case: Merck's vast cash flows are largely (and appropriately) managed, globally to minimize tax exposures.

And even so, it generated $10.7 billion in gross income before taxes last year. Were it willing to pay hefty repatriation taxes, a far larger number would flow to the bottom line, and be "brought home" as EPS each year. But it makes more sense to keep investing that money in Europe and the UK and Asia. . . to grow its overall businesses' profits in lower-tax jurisdictions.

So, what the AI chart actually shows. . . is only that, if Merck didn't mind paying more in income taxes in the US, it could instantly increase (not cut!) the dividend. But its yield is still pretty nice and fat, even with the stock sitting above $120/share on the NYSE most mornings, now. So. . . all in all, a "complete do over" for that AI engine. Cheers.

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