Bayer (BAYRY) Beats Q1 Earnings, Revenue Estimates
Zacks Investment Research | Apr 27, 2017 02:59AM ET
Bayer AG (DE:BAYGN)’s (OTC:BAYRY) first-quarter 2017 core earnings per share from continuing operations was $2.80 which beat the Zacks Consensus Estimate of $2.40. Earnings were up 11.4% year over year at €2.62 per share.
Total sales in the first quarter were approximately $14 billion, which surpassed the the Zacks Consensus Estimate of $13.7 billion. Earnings improved 11.7% to €13.2 billion after adjusting for currency and portfolio changes) on a reported basis.
Bayer’s share price has gained 12.9% year to date, while the Zacks classified Medical Generic Drugs industry gained 5.9%.
All growth rates mentioned below are on a year-over-year basis and after adjusting for currency and portfolio changes.
First Quarter Highlights
Effective from the first quarter, Bayer reports results under five divisions – Pharmaceuticals, Consumer Health, Crop Science, Animal Health and Covestro.
Revenues at the Pharmaceuticals segment increased 7.4% to €4,263 million backed by a persistently strong performance of the key products Xarelto, Eylea, Xofigo, Stivarga and Adempas. Also, performance of the other leading pharmaceutical products, Mirena, posted significant growth in the quarter, due to the launch of the new low-dose intrauterine device Kyleena.
Moreover, the company recorded an increase in sales of its diabetes treatment Glucobayits Aspirin Cardio product for the secondary prevention of heart attacks and its X-ray contrast agent Ultravist due to the positive development of business in China.
Additionally, Consumer Health sales were up 2.6% to €1,601 million driven by improvement across Europe / Middle East / Africa and Asia / Pacific. Sales in North America were flat year on year on a currency-adjusted basis, while business declined considerably in Latin America.
Crop Science sales were €3,120 million in the first quarter up 3.2% year over year. Growth at Crop Protection / Seeds was driven by improved sales in North America. Furthermore, sales growth recorded at Environmental Science was based on the delivery of products to the company that acquired its consumer business.
Sales of the Animal Health business came in at €440 million, up 2.9%. In the reported quarter, sales improved positively in the regions of North America, besides progressing well in Europe / Middle East / Africa. The development in North American region was due to the U.S. sales generated by the Cydectin product portfolio, which the company acquired from Boehringer Ingelheim Vetmedica, Inc..
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Covestro garnered sales of approximately €3,564 million in the quarter, up 23.6% year over year driven by higher selling pricesespecially at Polyurethanes.Volumes also increased considerably in all business units. Bayer’s interest in Covestro amounts to only 53% as of Mar 2017, which was 64% earlier in 2016.
2017 Earnings Outlook
Covestro expects a substantial sales increase and a significant improvement in earnings before interest, tax, depreciation and amortization (EBITDA) after adjustment for special items in 2017.
The company now projects sales to increase around €51 billion compared with previous expectation of more than €49 billion.
Core earnings per share from continuing operations are expected to grow by a mid- to high-single-digit percentage up against the previous expectation of growth of mid-single-digit percentage.
Our Take
Bayer beat both earnings and revenue estimates in the first quarter of 2017. We believe, the newly launched products at the Pharmaceuticals segment performed well during the quarter and should continue to do so in the upcoming quarters. Meanwhile, Bayer is looking forward to acquire Monsanto Company (NYSE:MON) in a deal worth approximately $66 billion.
Zacks Rank & Key Picks
Bayer currently carries a Zacks Rank #3 (Hold). Better-ranked stocks in the health care sector include Heska Corp. (NASDAQ:HSKA) and Galena Biopharma, Inc. (NASDAQ:GALE) . Each of these stock sports a Zacks Rank #1 (Strong Buy). You can see .
Heska’s earnings per share estimates increased from $1.53 to $1.65 for 2017 and from $1.80 to $2.01 for 2018, over the last 60 days. The company posted positive surprises in three of the four trailing quarters with an average beat of 291.54%. Its share price increased 50.7% year to date.
Galena’s loss per share estimates narrowed from $2.03 to 58 cents for 2017 over the last 60 days. The company posted positive earnings surprises in two of the four trailing quarters, with an average beat of 53.83%.
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