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What's In The Cards For Bayer (BAYRY) This Earnings Season?

By Zacks Investment ResearchStock MarketsNov 11, 2018 09:04PM ET
What's In The Cards For Bayer (BAYRY) This Earnings Season?
By Zacks Investment Research   |  Nov 11, 2018 09:04PM ET
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Bayer AG (DE:BAYGN) (OTC:BAYRY) is scheduled to report third-quarter 2018 results on Nov 13, before market open.

Bayer’s shares have decreased 35.2% so far this year against the industry’s increase of 8.3%.

The company delivered positive earnings surprise in two of the last four quarters and missed expectations twice. The average positive earnings surprise in the last four quarters is 19.19%. In the last reported quarter, Bayer delivered a negative surprise of 4.17%.

Let’s see how things are shaping up for this quarter.

Factors Likely to Influence Q3 Results

Bayer is primarily focused on the Life Science businesses. However, it reports under four business segments – Pharmaceuticals, Consumer Health, Crop Science and Animal Health.

Sales at the pharmaceutical segment rose in the first half of 2018 driven by key products like Xarelto, Eylea, Xofigo, Stivarga and Adempas. In August, Bayer along with its partners, Johnson & Johnson (NYSE:JNJ) and Regeneron (NASDAQ:REGN) , announced the approval for label expansion of Xarelto and Eylea, respectively, in Europe. The expanded patient population for these drugs bodes well for Bayer as it is likely to boost sales. Moreover, approval for new hemophilia drug, Jivi, in the United States will also boost segment sales. However, sales of Kogenate and Betaferon may continue to decline due to supply constraints and increasing competition, respectively.

Crop Science segment also performed well in the first six months of the year. Sales grew rapidly during the second quarter with the inclusion of pro-rata sales from Mosanto acquisition completed in early June. This acquisition will add significant amount of sales in the third quarter and boost Bayer’s presence in the seed business.

Sales growth in Animal Health segment is also likely to continue this quarter. Although sales at Consumer Health segment declined in the first half of 2018, we may see a turnaround in the second half. Bayer maintained it growth forecast in the range of 3%-4% for this segment on its second-quarter earnings call.

The company has been divesting certain businesses, in line with its strategy to focus on Life Science business. However, the company will lose significant sales due to divestures. The company stated that divestment of selected businesses to BASF will reduce anticipated sales by approximately €1 billion for 2018.

The Zacks Consensus Estimate for third-quarter sales and earnings is pegged at $11.31 billion and 41 cents, respectively.

Earnings Whispers

Our proven model does not conclusively show that Bayer is likely to beat estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to be able to beat estimates. But that is not the case here, as you will see below.

Earnings ESP: Its Earnings ESP is +20.99%. The Zacks Consensus Estimate is pegged at 41 cents while the Most Accurate Estimate is pegged at 49 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Bayer has a Zacks Rank #4 (Sell).

Note that we caution against stocks with a Zacks Rank #4 or 5 (Strong Sell) going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Stock to Consider

Here is a biotech stock that you may want to consider, as our model shows that it has the right combination of elements to post an earnings beat this quarter.

Galapagos NV (NASDAQ:GLPG) is expected to release its third-quarter results on Nov 13. The company has an Earnings ESP of +229.73% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

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Johnson & Johnson (JNJ): Free Stock Analysis Report

Bayer Aktiengesellschaft (BAYRY): Free Stock Analysis Report

Regeneron Pharmaceuticals, Inc. (REGN): Free Stock Analysis Report

Galapagos NV (GLPG): Free Stock Analysis Report

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What's In The Cards For Bayer (BAYRY) This Earnings Season?

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What's In The Cards For Bayer (BAYRY) This Earnings Season?

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