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Bayer Earnings Rise Y/Y

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Bayer’s (BAYRY) earnings during the first quarter of 2013 came in at €1.70 per share (approx. $2.24) compared with €1.67 per share (approx. $2.19) in the year-ago period. Earnings benefited from higher revenues.

Bayer recorded 2.1% (3.7% on an adjusted basis) growth in revenues to €10.3 billion. The increase was primarily driven by the HealthCare and the Crop Science segments of the company.

Segmental Performance during the Quarter

The three major segments – HealthCare, Crop Science and Material Science – accounted for approximately 43.3%, 26.9% and 27%, respectively, of total revenues during the first quarter of 2013. Revenues from the Crop Science and HealthCare segments improved by 5.9% and 2.3% respectively, whereas revenues from the Material Science segment remained flat year over year.

The HealthCare segment recorded revenues of €4.4 billion in the reported quarter. Both sub-segments, Consumer Health (adjusted growth of 4.8%) and Pharmaceuticals (adjusted growth of 5%) performed well in the quarter.

Sales growth in China, Germany and the US boosted the Pharmaceuticals segment. Growth in the Consumer Health subgroup, comprising Bayer’s over-the-counter drug business for human beings and animals, was primarily driven by the impressive performance of the Consumer Care division (growth of 9%).

The Crop Science division, which is engaged in developing and marketing chemical crop protection products (insecticides, herbicides, and fungicides), seeds and integrated plant biotechnology solutions for agricultural and non-agricultural uses, recorded sales of €2.8 billion in the first quarter of 2013. The Crop Science segment exhibited solid growth particularly in North America.

The Material Science segment, one of the world’s largest polymer manufacturers, posted sales of €2.8 billion in the reported quarter. The segment was benefitted by an overall price increase which was offset by a fall in volume, particularly in Europe and North America. Bayer expects the segment’s second quarter performance to surpass sales level of the first quarter.

2013 Outlook Maintained

Apart from releasing its financial results, Bayer also maintained its guidance for 2013. Earnings are still expected to increase in the high single-digit percentage year over year. Bayer continues to expect 2013 sales around €41 billion, an increase of 4−5% from the 2012 figure.

Revenues from the HealthCare segment are expected to come around €19 billion (mid-single-digit percentage growth). The company expects growth to be driven by new drugs.

Both Consumer Health and Pharmaceuticals sales are expected to exhibit mid-single-digit sales growth in 2013. Bayer expects Consumer Health to generate around €8 billion in 2013, whereas Pharmaceuticals sales are expected to be around €11 billion in 2013.

Bayer expects the Crop Science segment to grow in the high-single-digit percentage range to around €9 billion in 2013.

Material Science segment revenues are expected to increase marginally over 2012 levels to approximately €12 billion.

Bayer currently carries a Zacks Rank #3 (Hold). Other stocks such as Athersys Inc. (ATHX), XOMA Corporation (XOMA) and UCB (UCBJY) currently look more attractive in the pharma space. All these stocks carry a Zacks Rank #1 (Strong Buy).

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