Crop Science And Pharmaceuticals Will Thrive On Favorable Trends

Key Takeaways

• Strong pharma pipeline, new launches, and innovation are set to offset losses from expiring patents, supporting long-term revenue growth and margin improvement.
  
• Operational streamlining, litigation containment, and portfolio optimization aim to boost efficiency, resilience, and cash flow while enhancing future market stability.
  
• Regulatory, legal, patent, competitive, and geopolitical pressures are undermining Bayer's growth prospects, eroding margins, and adding prolonged uncertainty to future earnings stability.

Catalysts

Operates as a life science company worldwide.

• Strong demographic and health trends-including global population growth and rising chronic disease prevalence-continue to drive long-term demand for Bayer's Crop Science (boosted by higher corn and soybean adoption and digital/data-driven solutions) and Pharmaceuticals businesses (supported by major product launches such as Nubeqa, Kerendia, Beyonttra, and new labels/approvals for Lynkuet), all of which are expected to result in revenue growth and increasing pipeline visibility for future earnings.
  
• Sustained advances in Bayer's pharmaceutical innovation pipeline-evidenced by robust uptake in recently launched drugs and promising late-stage assets (such as asundexian and new indications for existing blockbusters)-are positioned to offset patent expirations and generic erosion, supporting both revenue replacement and setting a path for higher margins in later years as these assets scale.
  
• Ongoing margin expansion and operational efficiency initiatives-such as the streamlining of Crop Science production, cost-saving efforts targeting €1bn in annual improvements, and targeted restructuring in Consumer Health-are expected to enhance long-term net margins and cash flow conversion, particularly as regulatory disruptions in key crop protection products abate from 2026 onward.
  
• Bayer's strategic focus on portfolio optimization and disciplined divestitures-coupled with digital transformation, enhanced customer-centricity, and an R&D-rich environment-underpins a shift toward higher-value, less volatile market segments, increasing the resilience and quality of future earnings and improving net margin over time.
  
• Progress on litigation containment, including large case settlements at low average cost, strategic provision management, and an articulated multi-pronged legal strategy with a target to largely resolve legacy glyphosate and PCB exposures by end-2026, has the potential to remove a major overhang on earnings and valuation, signaling a medium-term inflection in net margin, earnings quality, and investor sentiment.

Bayer Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Bayer's revenue will grow by 1.3% annually over the next 3 years.
• Analysts assume that profit margins will increase from -7.4% today to 6.4% in 3 years time.
• Analysts expect earnings to reach €3.1 billion (and earnings per share of €2.99) by about September 2028, up from €-3.4 billion today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting €4.2 billion in earnings, and the most bearish expecting €2.0 billion.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 10.6x on those 2028 earnings, up from -8.1x today. This future PE is lower than the current PE for the GB Pharmaceuticals industry at 17.2x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 5.12%, as per the Simply Wall St company report.

Bayer Future Earnings Per Share Growth

Risks

• Heightened regulatory scrutiny and environmental activism-including loss of registration for key products like dicamba and Movento, and ongoing regulatory uncertainty-pose ongoing risks to Bayer's Crop Science division, threatening revenue growth, increasing compliance costs, and constraining net margins.
  
• Large, unresolved litigation exposures (glyphosate and PCB-related), ongoing settlements, and significant legal provisioning (€1.2 billion for glyphosate and €530 million for PCBs in Q2 2025 alone) put persistent pressure on net income, create material uncertainty for shareholders, and threaten cash flow stability for multiple years.
  
• Patent expirations and increasing generic and biosimilar competition (notably for Xarelto, which saw a 27% year-over-year decline and ongoing patent challenges in key markets) risk accelerating revenue declines in the pharmaceutical segment and compressing operating margins.
  
• Sustained pricing pressures in consumer health and core crop protection due to generics, weak consumer sentiment in key markets (U.S. and China), and market share gains by competitors risk slowing or flattening revenue growth, while muted market conditions hinder margin expansion.
  
• Material foreign exchange headwinds, as well as the potential for tariff escalations and geopolitical volatility, continue to threaten reported sales, earnings, and net financial debt, with FX swings and trade actions (such as EU pharma tariffs and U.S. market risk) likely to add uncertainty to revenue and profitability projections.

Valuation

• The analysts have a consensus price target of €28.526 for Bayer based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €39.0, and the most bearish reporting a price target of just €23.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be €48.0 billion, earnings will come to €3.1 billion, and it would be trading on a PE ratio of 10.6x, assuming you use a discount rate of 5.1%.
• Given the current share price of €28.04, the analyst price target of €28.53 is 1.7% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.