Back to top

Bayer (BAYRY) Misses on Q2 Earnings, Closes Monsanto Buyout

Read MoreHide Full Article

Bayer AG’s (BAYRY - Free Report) second-quarter 2018 earnings per share was 26 cents, per American Depository Receipt (“ADR”), which missed the Zacks Consensus Estimate of 48 cents.

On Sep 20, 2017, Bayer performed an ADR ratio change. With the new ratio, four Bayer ADRs correspond to one Bayer ordinary share. The second-quarter 2018 core earnings per share incorporate the effect of ADR ratio change. Core earnings per share were up 9.5% year over year to 46 cents from 42 cents, per ADR.

Total sales in the quarter were approximately $11.31 billion, up 18.1% from 9.58 billion in the year-ago quarter. While the company registered sales growth at Pharmaceuticals and Animal Health, business declined at Consumer Health. Sales at Crop Science increased compared with the year-ago quarter.

Year to date, shares of the company have lost 25.7% compared with the industry’s growth of 3.8%.

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

Quarter Highlights

The company completed the acquisition of Monsanto on Jun 7, 2018, for $63 billion including debt.  With the acquisition, Bayer now has the strongest portfolio of seed and crop protection products for a wide range of crops and indications, the best research and development platform and the leading digital farming business.

Bayer lost de facto control over the Covestro Group at the end of September 2017. As of Sep 30, 2017, there are four reporting segments — Pharmaceuticals, Consumer Health, Crop Science and Animal Health. As such, total figures for the four Life Science segments will no longer be presented separately.

Revenues at the Pharmaceuticals segment increased 3.1% to €4,217 million in the second quarter. The growth was backed by a persistently strong performance of the key products like Xarelto, Eylea, Xofigo, Stivarga and Adempas. However, this division suffered a decline in Kogenate’s sales due to the termination of an agreement with a distribution partner at the end of 2017. The division also saw a decline in the sales of Betaferon mainly due to strong competition in the United States. 

However, Consumer Health sales were down 1.4% to €1,413 million in the second quarter. This stemmed from decline in revenues in Europe/Middle East/Africa and North America.

In the reported quarter, Crop Science sales were €3,011 million, up 21.4% from the year ago quarter. Sales included €543 million from the acquisition of Monsanto on a prorated basis and €468 million from the businesses divested to BASF in August. The growth was witnessed partly due to significantly higher provisions for crop protection product returns recognized in the prior-year quarter due to high inventory levels in Brazil. 

The acquisition of Monsanto helped Bayer to significantly expand its seed business, particularly for corn and soybeans. Further, its existing herbicides business has significantly enlarged. In terms of regions, the transaction primarily expands Bayer’s business in North America and Latin America.

Sales from the Animal Health segment came in at €453 million, up 7.6% from the year-ago quarter. Growth was strongest in North America. Business developed well in Asia-Pacific and Latin America. Sales of the Advantage family of flea, tick and worm control products increased by 13.8%. However, sales decreased in Europe/Middle East/Africa.

2018 Outlook

As the acquisition of Monsanto closed later than expected, Bayer’s 2018 earnings will be lower than it had projected in its February forecast due to the seasonality of Monsanto’s business.

Sales are now expected to come in at more than €39 billion, up from its prior expectation of below €35 billion, with more than €5 billion attributable to the acquired Monsanto business. 

The divestment of selected businesses to BASF will reduce anticipated sales by approximately €1 billion. This forecast now corresponds to a mid-single-digit percentage increase (which was previously projected to be low- to mid-single-digit percentage increase) on a currency- and portfolio-adjusted basis.

Core earnings per share are expected to be between €5.70 and €5.90, which was previously expected to be at the prior-year level.

Bayer Aktiengesellschaft Price, Consensus and EPS Surprise

 

Bayer Aktiengesellschaft Price, Consensus and EPS Surprise | Bayer Aktiengesellschaft Quote

Zacks Rank & Stocks to Consider

Bayer is a Zacks Rank #3 (Hold) stock.

Some better-ranked stocks in the biotech sector are Gilead Sciences Inc. (GILD - Free Report) , Ligand Pharmaceuticals Inc. (LGND - Free Report) and Celgene Corp. (CELG - Free Report) . While Gilead and Ligand sport a Zacks Rank #1 (Strong Buy), Celgene carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Gilead’s earnings per share estimates have increased from $6.11 to $6.58 for 2018 and from $6.36 to $6.48 for 2019 over the past 60 days. The company delivered a positive earnings surprise in three of the trailing four quarters with an average beat of 6.43%. The stock has rallied 3.7% so far this year.

Ligand’s earnings per share estimates have moved up from $4.93 to $5.64 for 2018 and from $5.39 to $5.59 for 2019 in the last 30 days. The company delivered a positive earnings surprise in all of the trailing four quarters with an average beat of 59.54%. Share price of the company has increased 88.7% year to date.

Celgene’s earnings per share estimates have increased from $8.52 to $8.76 for 2018 and from $10.18 to $10.65 for 2019 over the past 60 days. The company delivered a positive earnings surprise in all of the trailing four quarters with an average beat of 2.38%.

Looking for Stocks with Skyrocketing Upside?

Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.

Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.

See the pot trades we're targeting>>



More from Zacks Analyst Blog

You May Like