Strong Quarter at Bayer, View Backed - Analyst Blog


Bayer 's ( BAYRY ) earnings per share during the first quarter of 2012 came in at €1.68 (approx $2.20) compared to €1.45 (approx. $1.99) in the year-ago period. Earnings were boosted by strong revenues. Sales were strong in the emerging markets, with sales improving 6%.

The company recorded a 6.8% (5.2% on an adjusted basis) growth in revenues to €10,056 million. Growth was witnessed across all divisions at Bayer.

Segmental Performance

The three major segments: Healthcare, Crop Science and Material Science and accounted for approximately 43.2%, 26% and 27.7%, respectively, of total revenues during the reported quarter. Revenues from the Crop Science, Healthcare and the Material Science segments improved by 15.6%, 4.2% and 3.8%, respectively.

The Healthcare segment recorded revenues of €4,342 million in the first quarter of 2012. Strong sales in the emerging markets drove growth in this segment. Both sub segments Consumer Health (adjusted growth of 2.9%) and Pharmaceuticals (adjusted growth of 1.6%) performed well in the reported quarter.

Robust sales of products such as Aspirin Cardio, Nexavar and Mirena contributed mainly to the rise in sales of the Pharmaceuticals segment. Blood-thinner Xarelto, co-developed with the Janssen Research and Development unit of Johnson & Johnson ( JNJ ), also performed well during the quarter.

Growth in the Consumer Health subgroup, comprising Bayer's over-the-counter drug business for human beings and animals, was primarily driven by impressive performances in the emerging markets. All the sub-groups, Consumer Care, Animal Health and Medical Care performed well during the quarter.

Sales in the Crop Science division, which develops and markets chemical crop protection products (insecticides, herbicides, and fungicides), seeds, and integrated plant biotechnology solutions for agricultural and non-agricultural uses, recorded sales €2,610 million in the first quarter of 2012.

Strong performances in all the regions, driven by improved market conditions, led to the strong showing by the segment. All the sub groups - Environmental Science, BioScience and Crop Protection unit performed impressively during the quarter.

The Material Science segment, one of the world's largest polymer manufacturers, was the least impressive performer of the three segments at Bayer. Segmental sales were €2,788 million. Performance of the segment was impacted by high raw material costs.

2012 Projection Backed

Apart from releasing financial results, Bayer also reaffirmed its guidance for 2012.  Bayer continues to expect sales in 2012 to come in at approximately €37 billion. While the Healthcare and Crop Science segments are expected to perform well, the MaterialScience segment is likely to be impacted by adverse market conditions resulting in flat year over year sales. Earnings at Bayer are expected to improve slightly.

Our Recommendation

We currently have a Neutral recommendation on Bayer in the long-run. The company carries a Zacks #3 Rank (Hold rating) in the short-run.

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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: BAYRY , JNJ

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