On Tuesday, CFRA, a research firm, adjusted its price target for Bayer AG (ETR:BAYGN) (BAYN:GR) (OTC: BAYRY), reducing it to €25.00 from a previous €29.00. The firm maintained a "Hold" rating on the stock. The decision to lower the price target reflects anticipated near-term challenges for the company, as indicated by its third-quarter results for the year 2024. Bayer (OTC:BAYRY) AG's sales decreased by 4%, and its EBITDA before special items margin contracted by 3.7 percentage points. These results were influenced by difficulties in the Crop Science (CS) business and ongoing investments in new pharmaceutical launches.
The company has subsequently revised its full-year outlook, now expecting EBITDA before special items to decline between 8% and 11% at constant currency rates, a downward revision from the previously estimated range of -3% to -9%. This revision comes after Bayer AG's third-quarter performance fell short of expectations.
Looking ahead, Bayer AG has provided insights into its expectations for the year 2025, which includes a forecast of subdued growth in the agriculture market and regulatory challenges for its CS business. Additionally, the Pharmaceuticals segment is likely to face increasing competition from generic products, particularly concerning the drug Xarelto. Nevertheless, the company anticipates that the growth from new product launches and efficiency measures will provide some balance to these headwinds.
In light of these projections, CFRA has also revised its earnings per share (EPS) estimates for Bayer AG. The firm now expects EPS to be €4.98 for the year 2024, reduced from an earlier estimate of €5.12. For the year 2025, the EPS forecast has been adjusted to €5.25, down from the previous forecast of €5.55. These adjustments reflect the firm's view on the company's financial prospects in light of current and anticipated market conditions.
In other recent news, Bayer AG's financial trajectory has been the center of attention for analysts. BMO Capital Markets adjusted its outlook on Bayer shares, reducing the price target from €30.00 to €26.00 due to the company's third-quarter performance not meeting expectations. The company's Crop Science division is expected to underperform compared to its competitors, and the pharmaceutical segment is also expected to experience a significant earnings contraction.
On a positive note, Bayer secured a significant legal victory when a Philadelphia Court jury ruled in favor of Bayer's Monsanto (NYSE:MON) unit in the Young Roundup product liability trial. This verdict could potentially influence future litigation involving Bayer and its widely used herbicide.
In terms of analyst upgrades, BofA Securities revised its rating on Bayer's stock from Underperform to Neutral, while also raising the price target from EUR27.00 to EUR31.00. This shift was influenced by a more optimistic outlook on the resolution of Bayer's legal issues, specifically those related to glyphosate and PCB.
InvestingPro Insights
Recent data from InvestingPro sheds additional light on Bayer AG's financial situation and market performance. Despite the challenges highlighted in CFRA's analysis, InvestingPro Tips suggest that Bayer's net income is expected to grow this year, and analysts predict the company will return to profitability. This aligns with the company's efforts to balance headwinds with new product launches and efficiency measures.
The stock's current valuation implies a strong free cash flow yield, which could be attractive to value-oriented investors. Additionally, Bayer has maintained dividend payments for 33 consecutive years, demonstrating a commitment to shareholder returns despite recent difficulties.
However, it's important to note that Bayer's stock has underperformed recently, trading near its 52-week low with a significant year-to-date price decline of 42.41%. The company's P/E ratio (adjusted) for the last twelve months stands at 3.62, which may indicate undervaluation relative to its peers in the pharmaceuticals industry.
For investors seeking a more comprehensive analysis, InvestingPro offers additional tips and insights that could provide a fuller picture of Bayer's investment potential.
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