Bright Outlook at Bayer - Analyst Blog


Bayer ( BAYRY ) divulged its sales growth expectations for three of its major segments through 2016. These segments - HealthCare, Crop Science and Material Science - accounted for approximately 47.1%, 22% and 28% of €40.2 billion of total revenues in 2013.

Bayer's HealthCare segment has been posting impressive sales on the back of encouraging performance of its newly launched pharmaceutical products. The segment's sales are expected to grow by 6% (on an adjusted basis) annually on an average through 2016. The HealthCare segment posted sales of €18.9 billion in 2013.

Bayer also raised its peak annual sales of the five newly launched pharmaceutical products - Xarelto (anticoagulant), Eylea (eye drug), Stivarga (oncology), Xofigo (oncology) and Adempas (pulmonary hypertension) - to at least €7.5 billion from the prior forecast of over €5.5 billion. In 2014, sales from these products are expected to be around €2.8 billion.

Fueled by the performance of these newly launched products, the pharmaceutical subgroup of the HealthCare segment is expected to exhibit annual sales growth of 8% on an adjusted basis through 2016. The subgroup contributed around €11.2 billion to segmental sales in 2013. The HealthCare segment's other subgroup, the Consumer Health segment, is expected to exhibit annual sales growth of 6% on an adjusted basis through 2016 on the back of strong performance of its non-prescription medicines and animal health businesses. The Consumer Health segment contributed around €7.7 billion to segmental sales in 2013.

Bayer's Crop Science segment is expected to grow by 6% (on an adjusted basis) annually on an average through 2016. The company's Crop Science business posted sales of €8.8 billion in 2013. Segmental sales are expected to benefit from encouraging performance of the Crop Protection business which is expected to achieve sales of €2.6 billion in 2016 compared with €1.5 billion in 2013.

Meanwhile, Bayer remains cautious about its Material Science business, which is expected to earn its cost of capital by 2016. The segment contributed €11.2 billion last year.

We are encouraged by the company's guidance through 2016, and particularly pleased with the expected growth rate of the company's newly launched pharmaceutical business. The Material Science business outlook is also impressive, given the kind of market environment it was experiencing in recent times.

Bayer presently carries a Zacks Rank #4 (Sell). Some better-ranked stocks include Alexion Pharmaceuticals, Inc. ( ALXN ), Alkermes ( ALKS ) and Gilead Sciences Inc. ( GILD ). All these stocks carry a Zacks Rank #1 (Strong Buy).

ALKERMES INC (ALKS): Free Stock Analysis Report

ALEXION PHARMA (ALXN): Free Stock Analysis Report

BAYER A G -ADR (BAYRY): Free Stock Analysis Report

GILEAD SCIENCES (GILD): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Business , Stocks

Referenced Stocks: ALKS , ALXN , BAYRY , GILD

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