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Bayer Reports Higher Q3 Earnings - Analyst Blog

Posted
11/1/2013 2:10:00 PM
By: Zacks.com
Referenced Stocks:BAYRY;GSK;JNJ;RHHBY

Bayer 's ( BAYRY ) earnings during the third quarter of 2013 came in at €1.27 per share (approx. $1.68) compared with €1.17 per share (approx. $1.46) in the year-ago period.

Bayer's third-quarter revenues of €9.6 billion remained almost flat year over year. Revenues from the Crop Science and HealthCare segments improved by 4.3% and 0.5% respectively, whereas sales at the Material Science segment declined 3.1% year over year.

Segmental Performance During the Quarter

The three major segments - HealthCare, Crop Science and Material Science - accounted for approximately 49.2%, 17.8% and 30% of total revenues, respectively, during the third quarter of 2013.

The HealthCare segment recorded revenues of €4.7 billion in the reported quarter. Revenues from both the Pharmaceuticals segment (adjusted growth of 10.6%) and the Consumer Health segment (adjusted increase of 2.9%) increased in the reported quarter.

Sales of new products like Xarelto (anticoagulant), Eylea (eye drug), Xofigo (oncology) and Stivarga (oncology) boosted the Pharmaceuticals segment. On the other hand, Bayer's Consumer Health subgroup sales were hampered by the disappointing performance of the Diabetes Care business, although the Medical Care and Animal Health sub-groups performed favourably.

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 €1.7 billion in the third quarter of 2013. The segment exhibited solid growth particularly in Latin America, Africa and the Middle East, along with Asia/Pacific.

The Material Science segment, one of the world's largest polymer manufacturers, posted sales of €2.9 billion in the reported quarter. Challenging market condition impacted the segment's revenues.

2013 Outlook

Apart from releasing its financial results, Bayer made some adjustments to its guidance for 2013. Bayer now expects 2013 sales to come around €40 billion (old guidance: €40−€41 billion), an increase of 4−5% from the 2012 figure.

Revenues from the HealthCare segment are still expected to come around €19 billion (mid-single-digit percentage growth). Bayer still expects the Pharmaceuticals segment to exhibit high-single-digit sales growth in 2013, primarily due to the segment's recent encouraging performance. Sales in the segment are expected to exceed €11 billion. Bayer also expects its new products (Xarelto, Eylea, Stivarga and Xofigo) contribute more than €1.4 billion to the segmental sales in 2013.

Meanwhile, the company still expects its Consumer Health sales to exhibit mid-single-digit sales growth, reaching the figure to around €8 billion in 2013.

Bayer expects the Crop Science segment to outperform the market. Segmental sales are expected to grow in the high-single-digit percentage range to around €9 billion in 2013. Based on the disappointing results, the company now believes that the Material Science segment revenues will be in line with the previous year sales of €11.5 billion.

Our Take

We are encouraged by the performance of the newly launched products at Bayer during the third quarter of 2013. The company also made significant progress with its pipeline.

Bayer, a large cap pharma stock, presently carries a Zacks Rank #2 (Buy). Other large cap pharma stocks such as Johnson & Johnson ( JNJ ), GlaxoSmithKline ( GSK ) and Roche ( RHHBY ) also carry comparable rank.



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