And even if Bayer should continue to struggle and not be able to grow again it can be a great investment when it is trading for a lower price. Looking at the sales in more detail, we see the top line declining due to several reasons. As already mentioned above, currency effects had a negative impact and led to a 4.3% decline YoY. Additionally, prices also declined 0.8% YoY and especially volume declined 7.4% being therefore the biggest negative contributor to declining sales. When looking at the growth potential of Bayer in the years to come, we can look at the three different segments that will all contribute to growth.
- And hence, it would take only about 3.5 years to repay the outstanding debt – or much longer.
- For companies like Stryker that operate in the healthcare industry, increased regulatory scrutiny can lead to uncertainty about future regulations and requirements for their products.
- Meanwhile, its best selling blood-thinner, Xarelto, witnessed a year-over-year increase of nearly 20%.
- Since its acquisition of Monsanto in 2018 it has faced countless lawsuits concerning the health risks of its glyphosate product Roundup.
- Investors are afraid of buying Bayer stock mainly because of its disastrous $63 billion acquisition of Monsanto in 2018.
If a stock is trading significantly below its peers’ valuations, it usually means something has gone terribly wrong with its business operations. Bayer also introduced an additional savings program and is expecting to save more than €1.5 billion annually as of 2024 on top of annual earnings contributions of €2.6 billion (which were announced in November 2018). Sales and earnings per share might stagnated in 2020 and 2021, but over the long run we should remain confident about Bayer’s growth potential. We can expect a settlement and payments being probably between €10 billion and €12 billion. Bayer also wants to settle possible future litigations to end the topic once and for all, but judge Chhabria raised concerns about this part of the settlement. The deadline for a settlement seems to be November 2, 2020 right now and management of Bayer still seems confident, that a settlement will be reached.
Instead of $51 billion to $52 billion in sales, management is now expecting only €48.5 billion to €49.5 billion in 2023. And these numbers are FX-adjusted – reported revenue is expected to be between €46.8 billion and €47.8 billion. The core EPS – another adjusted metric – is now expected to be between €6.20 and €6.40 – one Euro lower than in the previous guidance.
Bayer’s recent-term developments are problematic, and the trouble with roundup seems not to be over just yet – however, virtually all other sectors in the company are working well and delivering good results. There are several key reasons why Bayer, as a company, can be expected to continue to grow and deliver here. This is the company’s mission, and over time, the company has been delivering well on these. In this article, I’ll use that knowledge together with what the company reported to update my thesis, where I called the company not “as” undervalued, but still a “BUY”. Since that article, the company has fallen somewhat – but at today’s pricing, it’s even more appealing long-term.
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Another problem is the rather disappointing free cash flow in the last few years. While Bayer was able to generate close to €5 billion in free cash flow in 2018 and 2019, the years 2020 till 2022 were rather a disappointment. In 2022, Bayer could generate €3,111 million in free cash flow – but in 2021 only €1,415 million and in 2020 only €1,343 million. And as Bayer recently reported rather bearish second quarter results, I start with the negative aspects about Bayer.
From my perspective, their market value will likely stay low until better news comes—whenever that will be. In fact, the decline has been pretty steady since June 24, when Bayer stock traded at $20.54 per share. When comparing the total debt to the shareholder’s equity we get a D/E ratio of 1.26. Additionally, we can compare total debt to the operating income the business can generate. But here it gets difficult to decide what metric we should use and depending on the metric used as denominator, we get extremely different ratios.
In the second quarter, sales dropped 23.8% year-over-year to only €4,924 million. And here especially volume declined 15.1% year-over-year, which is not a good sign. When looking at the first half of 2023, the picture is still a little better with sales declining 11% year-over-year. But EBITDA in H1/23 already declined reseña del bróker. forex 26% compared to the same timeframe last year. After Bayer reported great results for fiscal 2022 – I have written about the results in my last article – second quarter results -Q were a disappointment once again. Sales declined 13.8% year-over-year from €12,819 million in Q2/22 to €11,044 million in Q2/23.
An important factor of its strong and attractively priced financial balance sheet is that the company boasts a strong portfolio of patents, playing a crucial role in pharmaceuticals, consumer health and agriculture. Its medicine portfolio comprises well-known household names as Asprin and MiraLAX and it is a crucial player in the agricultural industry. Especially when considering the long-term growth potential due to several megatrends and the reached settlement, the current valuation does not seem to reflect the intrinsic value of the stock. When using more realistic numbers, we must assume a negative free cash flow of €2.5 billion in fiscal 2021 (midpoint of guidance), €4 billion in free cash flow for 2022 and €4.5 billion in 2023.
When looking at the different segments, we can see that all three segments contributed to growth in the second quarter. Crop Science sales increased from €4,802 million last year to €5,021 million – reflecting 4.6% year-over-year growth. The Consumer Health segment increased sales from €1,201 million in Q2/20 to €1,290 million in Q2/21 – an increase of 7.4%. The highest increase came from the Pharmaceuticals segment, which could increase sales from €3,992 million in the same quarter last year to €4,494 million this quarter – 12.6% year-over-year growth. And when looking at the growth potential over the next few decades, Bayer will most likely profit from several megatrends.
Settlement of Glyphosate Litigations
Meanwhile, its best selling blood-thinner, Xarelto, witnessed a year-over-year increase of nearly 20%. The company also recognized core earnings per share of $2.73 in the quarter with a healthy net margin of 10%. While the news certainly wasn’t great and led to a sharp double-digit sell-off, we have to put the news in context. The current headwinds, which are still mild compared to many other companies, are a result from COVID-19.
German pharmaceuticals company Bayer condemns Russia’s ‘brutal aggression’ in Ukraine
Let’s start with a recent bullish argument – or a piece of information that can be rather bullish. Although Bill Anderson did not have a good start as CEO of Bayer with his first quarterly results, we can still be optimistic. And while I don’t want to bash the former CEO, many investors see Baumann as reason for the declining stock price. And one can’t deny that since 2015 Bayer was constantly struggling and mistakes were made. Summing up, I would still see Bayer’s balance sheet as problematic and one of the major issues speaking against an investment. On the other hand, debt levels are still manageable, and Bayer is not facing the risk of bankruptcy or severe liquidity issues.
Of course, these assumptions are based on the premise that Bayer won’t have to add several billions to the already existing €13 billion in provision for litigations. Free cash flow assumptions are still cautious in my opinion and even if Bayer will have to add an amount in the low-to-mid-single digit billions to its provisions, the assumptions should still be realistic. However, if the settlement is forcing Bayer to pay an amount close to or above €20 billion, we would have to adjust the intrinsic what is forex trading value calculation. And Bayer is not only expecting top-line growth in the next few years, but also see core EPS improving to €7.00 to €7.50, and for fiscal 2024, Bayer is expecting free cash flow to be around €5 billion again. There is evidence on both sides of the argument regarding whether or not glyphosate actually causes cancer. Last year, a study found that long-term exposure to glyphosate for routine activities like gardening increased the risk of developing non-Hodgkin lymphoma by 41%.
In the end, it’s all about what you’re paying for what you’re getting – and I will buy anything if I get to decide, or if I get to pay the price I want. Now, €50/share is higher than it once was, but it’s still a dirt-cheap valuation where Bayer yields nearly 4% even with a very conservative yield. Despite iq option overview good trends and results, company litigation and risks are still very clear in the company’s overall valuation profile. IPOs often move by double digits in their opening day session, but stocks are more likely to pop than drop as a strong opening day performance helps build momentum for the new issue.
It has €9.1 billion in cash and short-term investments at hand and a total amount of assets of €131 billion euros. Long-term debt has been high but stable at €39.4 billion, stemming from its acquisition of Monsanto in 2018. With free cash flow however picking up, Bayer is in a comfortable position liquidity wise.