Bayer’s BAYRY net income during the first quarter of 2015 came in at €1.3 billion (roughly $1.5 billion) compared with €1.4 billion (approximately $2.0 billion) in the year-ago period.
Bayer’s first-quarter revenues of €12.1 billion were up 14.8% year over year. Revenues benefited from strong sales in all three segments.
Segmental Performance
Bayer’s three major divisions — HealthCare, CropScience and MaterialScience — accounted for approximately 47.4%, 25.5% and 24.9% of total revenues, respectively, during the first quarter of 2015.
The HealthCare segment recorded revenues of approximately €5.7 billion in the reported quarter, up 7.2% from the year-ago figure. Revenues from the Pharmaceuticals (adjusted growth of 7.2%) sub-segment saw a year-over-year improvement driven by impressive sales of recently launched products like Xarelto (anticoagulant), Eylea (eye drug), Xofigo (oncology), Adempas (pulmonary hypertension) and Stivarga (oncology).
The Consumer Health sub-segment registered a year-over-year increase of 7.2%. Bayer has completed the acquisition of Merck & Co. Inc.’s MRK consumer care business.
The CropScience 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 €3.1 billion in the first quarter of 2015, up 1%.
The MaterialScience segment, a polymer manufacturer and supplier, posted sales of approximately €3.0 billion in the reported quarter, up 7.5% year over year. Higher volumes of polycarbonates; polyurethanes; and coatings, adhesives, specialties aided revenues.
Bayer plans to list its MaterialScience business on the stock market as a separate company by mid-2016. The company will focus on HealthCare and CropScience.
2015 Outlook Up
Bayer has raised its 2015 revenue guidance. The company now expects sales between €48 billion and €49 billion (previously €46 billion) in 2015. Foreign exchange movements are expected to have a positive impact on 2015 total sales by 8% (previously 3%).
The company’s core earnings are now expected to grow in the high teens as against the previous guidance of low teens. 2015 core earnings are expected to reflect a positive currency impact of 7%.
Revenues from the HealthCare segment are expected to display mid-single-digit percentage growth to reach around €24 billion in 2015 (previous guidance: €23 billion).
Bayer expects the Pharmaceuticals sub-segment to exhibit mid- to- high single-digit percentage sales growth to around €14 billion (previous guidance: €13 billion). The recently launched products, which contributed around €2.9 billion in 2014, are expected to rake in over €4 billion. The company now expects Consumer Health sales to increase to over €10 billion in 2015.
Sales from the CropScience segment are now expected to increase in the low- to- midsingle-digit percentage range to around €11 billion (previous guidance: €10 billion). The MaterialScience segment is expected to record lower sales in 2015.
Our Take
The newly launched products at Bayer performed impressively during the quarter. These products are expected to continue their strong run in the coming quarters as well. The company’s guidance is also encouraging.
Bayer carries a Zacks Rank #4 (Sell). Some better-ranked stocks in the health care sector include Actelion Ltd. ALIOF and Biogen Inc. BIIB. Both stocks carry a Zacks Rank #1 (Strong Buy).
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