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Bayer's (BAYRY) Q3 Earnings and Revenues Miss Estimates

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Bayer AG (BAYRY - Free Report) reported third-quarter 2023 core earnings of 10 cents per American Depositary Receipt, which missed the Zacks Consensus Estimate of 28 cents and also fell short of the year-ago quarter’s earnings of 29 cents per share.

The earnings miss in the reported quarter was due to higher impairment losses attributable to intangible assets. The company had to conduct impairment testing due to a sharp rise in capital market interest rates. This resulted in the recognition of noncash impairment losses of €3,951 million on intangible assets in the Crop Science Division due to interest rates.

Total sales in the third quarter were $11.25 billion, down from $11.37 billion reported in the year-ago quarter. Sales also missed the Zacks Consensus Estimate of $12.62 billion.

Shares of Bayer have declined 12.8% in the year to date against the industry’s growth of 4.5%.


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All growth rates mentioned below are on a year-over-year basis and after adjusting for currency and portfolio changes.

Quarter in Detail

Bayer reports under three segments, namely Crop Science, Pharmaceuticals and Consumer Health.

In the reported quarter, Crop Science sales were €4.4 billion, which remained relatively flat year over year as higher volumes in all regions were mostly offset by lower prices for glyphosate-based products following an exceptionally strong prior year. Revenues missed our model estimate of €5 billion.

Herbicides sales declined by 17.3% due to lower prices. However, Fungicides sales were up 16.2%, mainly due to higher volumes in Latin America. The Vegetable Seeds business improved by 6% in the reported quarter as higher volumes and prices in Europe/Middle East/Africa were partially offset by sales decline in North America due to lower volumes. Sales of Corn Seed & Traits improved 21.2% on increased prices in all regions. The Soybean Seed & Traits business also recorded 15.6% growth, mainly due to higher license revenues in Latin America.

Revenues in the Pharmaceuticals segment were flat at €4.5 billion in the third quarter. Sales declined in China due to the tender procedure, especially for Adalat (nifedipine) and lower demand for Aspirin cardio. Revenues from this business segment were also indirectly impacted by China’s anti-corruption campaign in the healthcare sector. Revenues missed our model estimate of €4.9 billion. 

However, Bayer’s new products, Nubeqa for cancer and Kerendia for the treatment of patients with chronic kidney disease associated with type 2 diabetes, continued to grow in the reported quarter along with its Radiology business. Nubega sales increased 96.9%, recording gains in all regions and witnessing significant improvements in volumes. Kerendia sales increased 146% in the third quarter of 2023, mainly due to a substantial rise in volumes in the United States.

Other product sales, such as the oral anticoagulant Xarelto, co-developed with J&J (JNJ - Free Report) , were relatively flat as higher volumes in Europe were partially offset by competitive and pricing pressure from generics, especially in China and the U.K. In the U.S. market, Xarelto is marketed by a subsidiary of J&J.

Sales of the ophthalmology drug, Eylea, increased 5.4% year over year due to the expansion of business as a result of higher volumes in Canada and Asia/Pacific, offset by falling prices in the EU.  Please note that Bayer’s HealthCare unit co-develops Eylea with Regeneron (REGN - Free Report) . Regeneron records net product sales of Eylea in the United States. Bayer records net product sales of Eylea outside the United States. REGN records its share of profits/losses in connection with sales of Eylea outside the United States.

Consumer Health sales increased 1.7% year over year to €1.4 billion as dermatology business sales increased, despite sluggish growth due to a weaker economic environment. Revenues missed our model estimate of €1.6 billion. Sales of cough, cold and allergy products lost 2.6% amid a persistently weak cold season.

Dermatology sales increased 8.5% to €325 million, driven by continued strong demand for Bepanthen. Sales in the Nutritionals category were flat year over year.

2023 Guidance Reaffirmed

Bayer reaffirmed its annual outlook given with the second-quarter results, which was published in its Half-Year Financial Report.

For 2023, the company expects to generate currency-adjusted sales of €48.5-€49.5 billion. The outlook indicates a decline of 2% to 3% on a currency and portfolio-adjusted basis.

Core earnings per share are projected at around €6.20 to €6.40 on a currency-adjusted basis.

Bayer also maintained its guidance for a sales decline of around 5% at Crop Science and 5% sales growth for the Consumer Health division (after adjusting for currency and portfolio changes). The company projected a flat year-over-year sales at Pharmaceuticals.

Zacks Rank & Stock to Consider

Bayer currently has a Zacks Rank #4 (Sell).

A better-ranked stock in the same industry is Apellis Pharmaceuticals (APLS - Free Report) , carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

In the past 30 days, the Zacks Consensus Estimate for Apellis’ 2023 loss per share has widened from $4.39 to $4.59. During the same time frame, the estimate for Apellis’ 2024 loss per share has narrowed from $2.41 to $1.92. Year to date, shares of APLS have lost 8.5%.

APLS beat estimates in two of the trailing four quarters, missing the mark on the other two occasions, delivering an average negative earnings surprise of 3.91%. 

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