Bayer Q4 Net Income Down Y/Y, Provides 2015 Outlook - Analyst Blog

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Bayer 's ( BAYRY ) net income during the fourth quarter of 2014 came in at €224 million (roughly $280 million) compared with €455 million (approximately $619 million) in the year-ago period.

Bayer's fourth-quarter revenues of €11.0 billion were up 11.6% year over year. Revenues benefited from strong sales in all three segments.

In 2014, Bayer's net income came in at €3.4 billion (roughly $4.6 billion) compared with €3.2 billion (approximately $4.2 billion) in the year-ago period. Revenues in the year were €42.2 billion, up 5.2%.

Segmental Performance

Bayer's three major divisions - HealthCare, Crop Science and Material Science - accounted for approximately 74.2%, 22.4% and 27.6% of total revenues, respectively, during 2014.

The HealthCare segment recorded revenues of approximately €5.6 billion in the reported quarter, up 7.8% from the year-ago figure. Revenues from the Pharmaceuticals (adjusted growth of 10.1%) sub-segment saw a year-over-year improvement driven by impressive sales from recently launched products. Sales of newly launched products like Xarelto (anticoagulant), Eylea (eye drug), Xofigo (oncology), Adempas (pulmonary hypertension) and Stivarga (oncology) boosted the Pharmaceuticals business.

The Consumer Health sub-segment registered a year-over-year increase of 4.2%. Bayer has completed the acquisition of Merck & Co. Inc.'s ( MRK ) consumer care business.

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 €2.2 billion in the fourth quarter of 2014, up 8.3%. The segment exhibited solid growth particularly in North America, Latin America/Africa/Middle East and Europe.

The Material Science segment, a polymer manufacturer and supplier, posted sales of approximately €2.9 billion in the reported quarter, up 9.6% year over year. Higher volumes for polycarbonates; polyurethanes; and coatings, adhesives, specialties aided revenues.

Bayer plans to list its Material Science business on the stock market as a separate company by mid-2016. The company will focus on Health Care and Crop Science.

2015 Outlook

Bayer expects its sales to grow in the low single-digit percentage range to approximately €46 billion in 2015. Foreign exchange movements are expected to adversely impact sales by 3%. The company's core earnings are expected to grow in the low teens.

Revenues from the HealthCare segment are expected to display mid single-digit growth with segmental revenues of around €23 billion.

Bayer expects the Pharmaceuticals sub-segment to exhibit mid- to- high single-digit percentage sales growth to around €13 billion. The recently launched products, which contributed around €2.9 billion in 2014, are expected to rake in €4 billion. The company expects Consumer Health sales to increase to around €10 billion in 2015.

Sales from the Crop Science segment are now expected to increase in the low- to mid-single-digit percentage range to around €10 billion. The Material Science segment is expected to record lower sales in 2015.

Our Take

The performance of the newly launched products at Bayer during the quarter was impressive. These products are expected to continue their strong run in the coming quarters as well. We also like the company's efforts to develop its pipeline.

Bayer carries a Zacks Rank #4 (Sell). Some better-ranked stocks in the health care sector include Affymetrix Inc. ( AFFX ) and Cytokinetics, Incorporated ( CYTK ). Both stocks carry a Zacks Rank #1 (Strong Buy).

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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 Nasdaq, Inc.

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

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