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Bayer (BAYRY) Q1 Earnings Beat Estimates, Retains View

Bayer AG’s BAYRY first-quarter core earnings surged 13.9% year over year to €2.37 per share (approximately $2.61) and beat the Zacks Consensus Estimate of $2.48.

Also, total revenue of €11.9 billion (approximately $13.2 billion) inched up 0.5%. The figure, however, failed to beat the Zacks Consensus Estimate of $13.6 billion.

Segmental Performance

Effective from the first quarter, Bayer is reporting results under five divisions – Pharmaceuticals, Consumer Health, Crop Science divisions, Animal Health and Covestro.

Revenues at the Pharmaceuticals segment climbed 9.2% year over year to €3.9 billion backed by impressive sales of the recently launched products. The Consumer Health segment reported sales of €1.5 billion, down 2.3% due to lower demand in Europe as a result of unfavorable macroeconomic conditions in Russia.

Crop Science, 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 2016, down 2.2%.
Animal Health grew 5.7% to €408 million driven primarily by higher demand in the U.S.

Covestro, the high-tech polymer materials business, posted sales of €2.9 billion in the quarter, down 5.4% year over year mainly due to lower selling prices.
Research and development expenses increased 17.3% to €1.1 billion, while general administration expenses were €497 million, up 5.5%.

2016 Outlook

Bayer confirmed its guidance for 2016. The company expects sales of approximately €35 billion at the Life Science businesses, which excludes contribution from Covestro. The company also expects core earnings per share to increase in the mid-single-digit percentage range.

Our Take

Bayer’s fourth-quarter results were mixed, with the company beating bottom-line estimates but missing on revenues. Nevertheless, newly launched products performed impressively during the quarter and should continue to do so in the upcoming quarters.

Bayer currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the health care sector include Anika Therapeutics Inc. ANIK, Aegerion Pharmaceuticals, Inc. AEGR and Cytori Therapeutics, Inc. CYTX, each sporting a Zacks Rank #1 (Strong Buy).

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