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Bayer (BAYRY) Q2 Earnings Match Estimates, Sales Up Y/Y

Zacks Equity Research

Bayer AG’s BAYRY second-quarter 2019 core earnings per share was 46 cents, per American Depositary Receipt (“ADR”), flat year over year and in line with the Zacks Consensus Estimate.

On Sep 20, 2017, the company changed the ADR ratio. Per the new ratio, four Bayer ADRs correspond to one Bayer ordinary share. This change was reflected in first-quarter 2019 core earnings per share.

Total sales in the quarter were approximately $12.91 billion, up 14.1% from $11.31 billion in the year-ago quarter. The Pharmaceuticals and Consumer Health divisions registered higher sales year on year, while sales in the Crop Science segment declined compared with the prior-year quarter’s reported figure due to the extreme weather conditions in North America.

Shares of the company have declined 2.3% year to date against the industry’s growth of 3.6%.

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 in June 2018 for $63 billion, including debt. With this 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.

The company reports in four segments — Pharmaceuticals, Consumer Health, Crop Science and Animal Health.

In the reported quarter, Crop Science sales were €4,788 million, up 59% from the year-ago quarter. Business at this segment was significantly affected by extreme weather conditions. Flood and heavy rains in the Midwestern United States and drought in large parts of Europe and Canada hurt the segment’s performance. Ongoing trade disputes also weighed on the business. Sales were down 3.1%, after adjusting for currency and portfolio effects, with the development of the acquired business only taken into account for the period from Jun 7 through 30. A considerable drop in sales in North America resulted in the decline.

Revenues at the Pharmaceuticals segment increased 3.9% to €4,422 million in the second quarter. Growth was backed by consistent strong performance of key products like Xarelto, Eylea, Stivarga and Adempas. However, sales of Betaferon/Betaseron, a multiple sclerosis treatment, decreased due to intense competition in the United States. Sales of cancer drug Nexavar also declined due to the competitive market environments in the United States and Japan.

Consumer Health sales were up 2.1% year over year to €1,442 million in the second quarter. The business gained in Latin America, Europe/Middle East/Africa (EMEA) and Asia-Pacific on currency and portfolio-adjusted basis. However, segment sales declined in North America. The Allergy & Cold category delivered the strongest performance, with sales increasing 10.8%. Sales were up in other categories, especially the Digestive Health (up 7.9%) and the Nutritional (up 4%) categories. However, Bayer registered a 4.2% decrease in sales in the Dermatology category and 3.2% in the Pain & Cardio category.

Sales of Animal Health came in at $454 million, down 2.7% year over year due to volumes declining substantially in the United States following a strong prior-year quarter. The positive developments in Asia-Pacific and Latin America did not fully offset this.

2019 Outlook

The company reaffirmed its outlook for 2019. Sales are expected to be €46 billion, increasing about 4% on currency and portfolio-adjusted basis. However, this outlook is becoming increasingly ambitious, given the challenging environment for the Crop Science business.

Core earnings per share are expected to rise to €6.80 on a currency-adjusted basis.

Bayer Aktiengesellschaft Price, Consensus and EPS Surprise

 

Bayer Aktiengesellschaft Price, Consensus and EPS Surprise

Bayer Aktiengesellschaft price-consensus-eps-surprise-chart | Bayer Aktiengesellschaft Quote

 Zacks Rank & Stocks to Consider

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

Some better-ranked stocks are Roche Holding AG RHHBY, AbbVie Inc. ABBV and Novartis AG NVS. While Roche carries a Zacks Rank #1 (Strong Buy), AbbVie and Novartis carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Roche’s earnings per share estimates have increased from $2.41 to $2.49 for 2019 and from $2.44 to $2.56 for 2020 in the past 60 days.

AbbVie’s earnings per share estimates have increased from $8.81 to $8.88 for 2019 over the past 60 days. The company delivered a positive earnings surprise in three of the trailing four quarters, the average beat being 2.89%.

Novartis’ earnings per share estimates increased from $5.01 to $5.03 for 2019 and from $5.56 to $5.71 for 2020 over the past 60 days. The company delivered a positive earnings surprise in two of the trailing four quarters, the average beat being 2.84%.

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