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Bayer (BAYRY) Intends to Slash Dividends Amid Challenges
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Bayer AG (BAYRY - Free Report) announced plans to cut its dividend rate for 2023.
Following a review of the company’s capital allocation priorities to reduce debt, BAYRY plans to amend its dividend policy to pay out only the legally required minimum for three years.
Consequently, the decision will reduce the dividend to €0.11 per share for 2023 compared with €2.40 in 2022.
This proposal comes as the company faces a high level of debt, coupled with high-interest rates and a challenging free cash flow situation.
The ongoing glyphosate litigation in the United States has adversely impacted Bayer’s cash position due to high legal costs.
Glyphosate is the active ingredient in Roundup weedkiller. Bayer acquired Roundup weedkiller through Monsanto’s buyout in 2018. However, several lawsuits have been filed by people for the same, alleging that Monsanto’s herbicide caused them to develop cancers.
It has also been alleged that people were not made aware of the cancer risks either by Monsanto or Bayer.
Shares of Bayer have lost 43.5% in the past six months against the industry’s growth of 12.2%.
Image Source: Zacks Investment Research
As of Sep 30, 2023, the company’s net financial debt (debt less cash and cash equivalents and current financial assets) was a staggering €38.7 billion. Such a huge level of debt is a matter of significant concern. The going has been challenging for Bayer of late.
Sales in the Crop Science division declined significantly in 2023 due to lower volumes and prices of glyphosate-based products. The decline was witnessed mainly in the United States, where Bayer experienced general inventory de-stocking efforts from its retail partners as well as reduced weed pressure due to the drought conditions in a significant portion of the corn and soybean growing regions.
Pipeline setbacks also weigh on the stock. The late-stage study, OCEANIC-AF, investigating asundexian compared with direct oral anticoagulant Eliquis (apixaban) in patients with atrial fibrillation (AF) and at risk for stroke, was stopped early due to the lack of efficacy. This is a major setback, given the candidate’s potential.
The decision to stop the OCEANIC-AF study was based on the recommendation of the study’s Independent Data Monitoring Committee (IDMC) as part of the ongoing surveillance, which showed an inferior efficacy of asundexian versus the control arm. Nevertheless, IDMC recommends continuing the phase III OCEANIC-STROKE study as planned.
Moreover, one of the top drugs in the pharmaceutical division, Xarelto, is facing generic competition.
In light of these challenges, Bayer is implementing a new operating model to reduce hierarchies, eliminate bureaucracy, streamline structures and accelerate decision-making processes. The company is also undertaking significant job cuts.
In the past 30 days, the Zacks Consensus Estimate for Puma Biotech’s 2023 earnings per share (EPS) has remained constant at 73 cents. During the same time frame, the consensus estimate for 2024 EPS has remained steady at 69 cents. Over the past year, shares of PBYI have surged 70.1%.
PBYI’s earnings beat estimates in three of the trailing four quarters and missed the same in one, delivering an average surprise of 76.55%.
In the past 30 days, Sarepta’s loss estimates for 2023 have improved from $6.80 per share to $6.57. The bottom-line estimate for 2024 has risen from $2.04 to $2.43 in the past 60 days.
Sarepta’s earnings beat estimates in each of the trailing four quarters, delivering an average surprise of 48.67%. In the previous reported quarter, its earnings beat estimates by 72.29%.
For 2024, loss estimates for Editas Medicine have narrowed to $2.48 from $2.53 in the past 60 days. EDIT’s earnings beat estimates in three of the trailing four quarters and missed in one, delivering an average surprise of 11.44%. In the previous reported quarter, its earnings beat estimates by 14.06%.
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Bayer (BAYRY) Intends to Slash Dividends Amid Challenges
Bayer AG (BAYRY - Free Report) announced plans to cut its dividend rate for 2023.
Following a review of the company’s capital allocation priorities to reduce debt, BAYRY plans to amend its dividend policy to pay out only the legally required minimum for three years.
Consequently, the decision will reduce the dividend to €0.11 per share for 2023 compared with €2.40 in 2022.
This proposal comes as the company faces a high level of debt, coupled with high-interest rates and a challenging free cash flow situation.
The ongoing glyphosate litigation in the United States has adversely impacted Bayer’s cash position due to high legal costs.
Glyphosate is the active ingredient in Roundup weedkiller. Bayer acquired Roundup weedkiller through Monsanto’s buyout in 2018. However, several lawsuits have been filed by people for the same, alleging that Monsanto’s herbicide caused them to develop cancers.
It has also been alleged that people were not made aware of the cancer risks either by Monsanto or Bayer.
Shares of Bayer have lost 43.5% in the past six months against the industry’s growth of 12.2%.
Image Source: Zacks Investment Research
As of Sep 30, 2023, the company’s net financial debt (debt less cash and cash equivalents and current financial assets) was a staggering €38.7 billion. Such a huge level of debt is a matter of significant concern. The going has been challenging for Bayer of late.
Sales in the Crop Science division declined significantly in 2023 due to lower volumes and prices of glyphosate-based products. The decline was witnessed mainly in the United States, where Bayer experienced general inventory de-stocking efforts from its retail partners as well as reduced weed pressure due to the drought conditions in a significant portion of the corn and soybean growing regions.
Pipeline setbacks also weigh on the stock. The late-stage study, OCEANIC-AF, investigating asundexian compared with direct oral anticoagulant Eliquis (apixaban) in patients with atrial fibrillation (AF) and at risk for stroke, was stopped early due to the lack of efficacy. This is a major setback, given the candidate’s potential.
The decision to stop the OCEANIC-AF study was based on the recommendation of the study’s Independent Data Monitoring Committee (IDMC) as part of the ongoing surveillance, which showed an inferior efficacy of asundexian versus the control arm. Nevertheless, IDMC recommends continuing the phase III OCEANIC-STROKE study as planned.
Moreover, one of the top drugs in the pharmaceutical division, Xarelto, is facing generic competition.
In light of these challenges, Bayer is implementing a new operating model to reduce hierarchies, eliminate bureaucracy, streamline structures and accelerate decision-making processes. The company is also undertaking significant job cuts.
Zacks Rank & Stocks to Consider
Bayer currently has a Zacks Rank #4 (Sell).
Some better-ranked stocks in the healthcare sector are Puma Biotechnology, Inc. (PBYI - Free Report) , Editas Medicine (EDIT - Free Report) and Sarepta Therapeutics (SRPT - Free Report) . While PBYI currently sports a Zacks Rank #1 (Strong Buy), EDIT and SRPT carry a Zacks Rank #2 (Buy) each. You can see the complete list of today’s Zacks #1 Rank stocks here.
In the past 30 days, the Zacks Consensus Estimate for Puma Biotech’s 2023 earnings per share (EPS) has remained constant at 73 cents. During the same time frame, the consensus estimate for 2024 EPS has remained steady at 69 cents. Over the past year, shares of PBYI have surged 70.1%.
PBYI’s earnings beat estimates in three of the trailing four quarters and missed the same in one, delivering an average surprise of 76.55%.
In the past 30 days, Sarepta’s loss estimates for 2023 have improved from $6.80 per share to $6.57. The bottom-line estimate for 2024 has risen from $2.04 to $2.43 in the past 60 days.
Sarepta’s earnings beat estimates in each of the trailing four quarters, delivering an average surprise of 48.67%. In the previous reported quarter, its earnings beat estimates by 72.29%.
For 2024, loss estimates for Editas Medicine have narrowed to $2.48 from $2.53 in the past 60 days. EDIT’s earnings beat estimates in three of the trailing four quarters and missed in one, delivering an average surprise of 11.44%. In the previous reported quarter, its earnings beat estimates by 14.06%.