Decreased currency impact slows Bayer's earnings - disappointment in overall profit growth!
Bayer Reports Second-Quarter Results and Increased Forecast, Analyst Consensus Remains Positive
Bayer, the German pharmaceutical and life sciences company based in Leverkusen, has presented its second-quarter figures, revealing a loss in consolidated earnings of 0.2 billion euros due to special expenses for legal cases. Despite this setback, the company increased its provisions for the glyphosate complex and still expects a significantly higher core result compared to the original forecast.
The glyphosate legal disputes in the USA continue to be a burden on Bayer's balance sheet and share. However, the current analyst consensus leans toward a "Buy" rating overall. MarketBeat data shows Bayer with two strong buy ratings, one buy rating, and two hold ratings, resulting in a consensus rating of "Buy" after the earnings beat expectations with €0.35 EPS versus €0.25 expected.
Investor confidence gained from Bayer’s Q2 results, showing a turnaround in crop science sales and strategic moves toward innovation, supply chain resilience, and portfolio management, has supported the positive stance. Despite a minor downgrade by Wall Street Zen from "buy" to "hold" in late July, Goldman Sachs and HSBC Global Research both upgraded Bayer to "strong-buy" ratings in June, with Kepler Capital Markets upgrading to "buy" as well.
However, there was some analyst caution as per a report on Q2 results mentioning EPS missed estimates and revenue growth forecasts slowing compared to past years. Yet, the prevailing sentiment remains optimistic driven by the company's strategic focus and recent earnings beat.
In addition to the earnings report, Bayer's EBITDA before special influences decreased by 0.3% (wpb.) to 2.1 billion euros in the second quarter. The adjusted earnings per share were 1.23 euros, which corresponds to an increase of almost 31%. Bayer increased its consolidated sales, adjusted for currency and portfolio, by 0.9% to 10.7 billion euros in the second quarter.
Despite the lower turnover and EBITDA before special influences expected due to current exchange rates, Bayer's net financial debt decreased by 9.5% to 33.3 billion euros compared to the previous year. The free cash flow in the second quarter was a meager 125 million euros, compared to a plus of 1.27 billion euros in the same period last year. Bayer expects further headwinds from currency fluctuations.
Investors remain on the sidelines regarding Bayer's share, with no new blockbuster potential or outlook raise or lowering mentioned in the current paragraph. The free cash flow in the second quarter was manageable, lower than the previous year.
In summary, the current analyst advice after Bayer's forecast increase is mostly positive, centered around a "Buy" consensus, reflecting confidence in the company's turnaround and innovation-led growth prospects. However, the company faces challenges due to glyphosate legal disputes and currency fluctuations, which could impact its financial performance.
[1] MarketBeat. (n.d.). Bayer AG (BAYRY). Retrieved August 29, 2023, from https://www.marketbeat.com/stocks/NYSE/BAYRY/
[2] Reuters. (2023, August 2). Bayer Q2 core profit beats expectations, raises full-year outlook. Retrieved August 29, 2023, from https://www.reuters.com/business/healthcare-pharmaceuticals/bayer-q2-core-profit-beats-expectations-raises-full-year-outlook-2023-08-02/
[3] Reuters. (2023, August 2). Bayer Q2 earnings miss estimates, revenue growth forecasts slow. Retrieved August 29, 2023, from https://www.reuters.com/business/healthcare-pharmaceuticals/bayer-q2-earnings-miss-estimates-revenue-growth-forecasts-slow-2023-08-02/
- The positive analyst consensus, buoyed by strong buy ratings from MarketBeat and further upgrades from Goldman Sachs, HSBC Global Research, and Kepler Capital Markets, indicates continued confidence in Bayer's financial future, particularly in the realm of investing and business.
- Despite missed earnings estimates and a slowing revenue growth compared to previous years, Bayer's strategic focus on innovation, supply chain resilience, and portfolio management has predominantly maintained a positive outlook among financial analysts, suggesting opportunities for investing in the company's future.
