Company Reports

We believe Bayer has a Morningstar economic moat rating of none. Despite some competitive advantages in its healthcare and crop science businesses when analyzed in isolation, we think the company's returns on invested capital have been weighed down by its $63 billion acquisition of Monsanto in 2018 and will remain below the cost of capital over the next 10 years or so.

Bayer reported second-quarter revenue growth of 2% on a currency- and portfolio-adjusted basis and a core earnings per share decline of 17%. Management's full-year guidance at constant currencies is unchanged and includes 1.5% revenue growth and EUR 4.55 core EPS at the midpoints. Shares rallied 2%.

On June 25, the US Supreme Court ruled in favor of Bayer in its decision of Monsanto v. Durnell, which brings significant containment to Bayer's glyphosate litigation. Shares rallied about 19% after the announcement.

We believe Bayer has a Morningstar Economic Moat Rating of none. Despite some competitive advantages in its healthcare and crop science businesses when analyzed in isolation, we think the company's returns on invested capital have been weighed down by its $63 billion acquisition of Monsanto in 2018 and will remain below the cost of capital over the next 10 years or so.

Bayer reported first-quarter revenue growth of 4% on a currency- and portfolio-adjusted basis and core earnings per share growth of 13%. Management reiterated its full-year guidance at constant currencies, including 1.5% revenue growth and EUR 4.25 core EPS at the midpoints. Shares rallied 3%-4%.

We believe Bayer has no moat. Despite some competitive advantages in its healthcare and crop science businesses when analyzed in isolation, we think the company's returns on invested capital have been weighed down by its $63 billion acquisition of Monsanto in 2018 and will continue to be below the cost of capital over the next 10 years or so.

Bayer reported full-year revenue growth of 1.1% and EUR 4.57 core EPS on a currency- and portfolio-adjusted basis using its revised calculation for core metrics. Guidance for 2026 includes 1.5% revenue growth and EUR 4.25 core EPS at the midpoints, assuming 2025 year-end currency rates.

Bayer announced a US class settlement covering most of its current and future claims related to Roundup, its glyphosate-based weed killer. It increased its provisions by EUR 4 billion related to this and other claims, including polychlorinated biphenyl cases.

We believe Bayer has no moat. Despite some competitive advantages in its healthcare and crop science businesses when analyzed in isolation, we think the company's returns on invested capital have been weighed down by its $63 billion acquisition of Monsanto in 2018 and will continue to be below cost of capital over the next ten years or so.

Bayer reported 1% year-on-year growth in revenue on a currency- and portfolio-adjusted basis, and 21% growth in EBITDA before special items. Management confirmed its full-year guidance for core EPS of EUR 5.05 at the midpoint but also raised special items in EBITDA and EBIT by EUR 750 million.

Bayer reported 0.9% growth on a currency and portfolio-adjusted basis, and management increased its full-year guidance for currency-adjusted core earnings per share by EUR 0.30 at the midpoint. However, it also booked EUR 1.7 billion of provisions for glyphosate litigation.

We are taking a fresh look at our moat rating for Bayer after examining its historical returns on invested capital since its Monsanto acquisition.

We believe Bayer has no moat. Despite some competitive advantages in its healthcare and crop science businesses when analyzed in isolation, we think the company's returns on invested capital have been weighed down by its $63 billion acquisition of Monsanto in 2018 and will continue to be below cost of capital over the next five years or so.

Bayer reported flat year-on-year earnings growth on a currency- and portfolio-adjusted basis, and a decrease in EBITDA before special items of 7%. Management reconfirmed its previous full-year guidance.

We believe Bayer has created a narrow economic moat on the basis of the competitive advantages of the healthcare group. We believe its crop science business holds few synergies with the prescription drug business.

We believe Bayer has created a narrow economic moat on the basis of the competitive advantages of the healthcare group. We believe its crop science business holds few synergies with the prescription drug business.

Bayer’s fourth-quarter earnings were in line with our expectations, while guidance for 2025 was weak but still roughly in line with our expectations. We maintain our fair value of EUR 45.10 per ordinary share and $10.60 per ADR. Next year will continue to be challenging with flat growth prospects, as pharmaceuticals will be dragged down by accelerating declines in its blood thinner Xarelto and crop sciences faces ongoing challenges. However, new drug launches could drive a return to positive growth starting in 2026.

We believe Bayer has created a narrow economic moat on the basis of the competitive advantages of the healthcare group. Bayer is evaluating the divestitures of the crop science and consumer healthcare businesses, which appear to hold few synergies with the prescription drug business.

Bayer’s third-quarter earnings were lower than our expectations, with foreign exchange headwinds in crop sciences and consumer health significantly affecting the top-line reported results. After a fresh look at the company’s product lines and margin profile, we lower our fair value to EUR 45.10 per ordinary share (from EUR 68.00) and $10.60 per ADR (from $18.50). Although parts of the pharmaceuticals business are attractive to us, and we recognize the near-term margin improvement driven by the company’s cost-cutting programs, our model now incorporates a more pessimistic long-term view of growth and profit margins, which are the main drivers for our lower fair values.

Bayer’s ongoing litigation woes reared their head again as a Washington court said it would review a previous ruling in May that was favorable for Bayer. Although prolonging this case, which focuses on polychlorinated biphenyls, is negative for sentiment, it does not change our outlook on the company. We maintain our fair value estimate of EUR 68/$18.50 (local/ADR) and continue to view Bayer as undervalued.