Bayer Q1 EBITDA Beats by 13%; Reaffirms Full-Year Guidance; Maintains Buy Rating

Overview

Goldman Sachs published its initial review of Bayer AG’s Q1 2026 results. The report shows that while Bayer’s Q1 revenue was in line with expectations, its adjusted EBITDA (excluding special items) exceeded market consensus by 13%, and core EPS beat consensus by 23%. Despite geopolitical uncertainties and generic competition pressures on certain products, the company reaffirmed its full-year financial guidance for FY2026. Goldman Sachs views these results as encouraging, particularly due to Crop Science’s underlying strength and robust growth from key pharmaceutical assets, and maintains its 'Buy' rating (Conviction List) with a €55 price target.

Core views

Strong results beat expectations, driven by margin improvements and one-time gains. Bayer reported Q1 2026 group sales of €13.405 billion, broadly in line with the Vara consensus estimate of €13.438 billion. However, adjusted group EBITDA (excluding special items) reached €4.453 billion, surpassing the consensus estimate of €3.929 billion by 13%. This outperformance was primarily driven by stronger-than-expected margins in both the Crop Science and Pharma segments. Core EPS came in at €2.71, beating consensus by 23%. Segment performance diverged: Crop Science benefited from one-time factors, while Pharma held up against generic pressure. In Crop Science, the Seeds & Traits business was boosted by a one-time licensing payment from Corteva (~€450 million), along with Dicamba price recovery following re-registration and front-loaded purchasing patterns (some Q2 demand pulled into Q1). Although Crop Protection remained volatile due to generic pricing pressure and procurement delays caused by geopolitical tensions, the segment’s EBITDA margin beat consensus by 537 basis points. Pharma sales were slightly below expectations (-2%), mainly impacted by declines in Xarelto and Eylea, but growth from Nubeqa and Kerendia, plus ~€120 million in asset divestment income, offset the headwinds, resulting in Pharma EBITDA beating consensus by 10% (€114 million). Full-year guidance reaffirmed under conservative FX assumptions. Bayer reaffirmed its FY2026 guidance, expecting constant-currency revenue growth of 0%-3%, with a -1% foreign exchange headwind based on March 31, 2026 rates. Goldman Sachs notes that at current exchange rates, the FX headwind could widen to -2% to -3%, broadly in line with consensus, implying limited revisions to market estimates. The company expects low single-digit revenue growth across Pharma, Crop Science, and Consumer Health, and maintains its EBITDA margin guidance ranges for each segment. Cash flow impacted by litigation payments; pipeline updates limited. Q1 free cash flow was -€2.3 billion, including ~€2.0 billion in Glyphosate and PCB litigation payments, resulting in underlying free cash flow of -€318 million. On litigation, there have been no updates on claim volumes since the Supreme Court hearing, and the Glyphosate provision remains at €9.6 billion. Pipeline-wise, the Vericiguat program was terminated, Finerenone received a new indication approval in the EU and filed for a new U.S. indication, and top-line results for 124I-Evuzamitide are expected in 2026.

Analysis framework

Goldman Sachs employed a sum-of-the-parts (SOTP) versus consensus comparison framework. First, it broke down group-level results into the three core segments—Pharma, Crop Science, and Consumer Health—and compared actuals against market consensus (Vara Consensus) and internal guidance to identify specific sources of outperformance (e.g., one-time Crop Science income, Pharma cost controls). Second, it analyzed key product sales (e.g., Xarelto, Nubeqa, Kerendia) to quantify the offset between generic erosion and new drug growth. Finally, it integrated FX sensitivity analysis and litigation-related cash flow impacts to assess the robustness and risks behind the reaffirmed guidance, leading to the conclusion to maintain the rating.

Methodology notes

• Valuation MethodSOTP Valuation

  Sum-of-the-Parts (SOTP) Valuation

  Goldman Sachs assigned 50% weight to SOTP valuation in its price target calculation—valuing Bayer’s Pharma, Crop Science, and other business segments independently before summing them. This approach better reflects the true value of a diversified conglomerate and avoids distortions from single-multiple valuations.

• Valuation MethodDCF Model

  Discounted Cash Flow (DCF) Model

  Goldman Sachs also used a DCF model (50% weight in price target) to assess Bayer’s intrinsic value, assuming a weighted average cost of capital (WACC) of 9.3% and a terminal growth rate of 1.5%. DCF focuses on long-term free cash flow generation, making it a core tool for evaluating mature multinational pharmaceutical companies.

• Industry/ Sector Analysis FrameworkVolume-price decomposition

  Volume-Price Decomposition Analysis

  In analyzing Crop Science and Pharma segments, the report distinguished between volume growth (e.g., strong Kerendia uptake in the U.S. and China) and pricing effects (e.g., Dicamba price recovery, U.S. IRA-driven price pressure on Nubeqa), helping investors understand the sustainability of revenue drivers.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Bayer AG (BAYGN.US)

  Primary coverage; results beat expectations and guidance reaffirmed; Buy rating maintained

  Strengths

  Strong margin recovery in Crop Science; growth from new Pharma drugs (Nubeqa, Kerendia) offsetting generic losses; effective cost control

  Weaknesses

  Intense generic competition impacting Xarelto and Eylea; free cash flow dragged down by large litigation payments; geopolitical supply chain risks

  Comparison

  Compared to other European pharma majors in its coverage universe, Bayer’s unique positioning in Crop Science provides differentiation, though litigation overhang remains a key valuation discount factor

  Risks

  Adverse litigation outcomes or slower-than-expected resolution; reversal of Crop Science profitability momentum; greater-than-expected generic erosion in Pharma

Key data

• Q1 Group Sales€13.405 billionBroadly in line with consensus estimate of €13.438 billion
• Q1 EBITDA (Excluding Special Items)€4.453 billion13% above consensus estimate of €3.929 billion
• Q1 Core EPS€2.7123% above consensus
• Q1 Free Cash Flow-€2.3 billionIncludes ~€2.0 billion in litigation payments; underlying FCF was -€318 million
• FY2026 Revenue Guidance0% to 3% (constant currency)Guidance reaffirmed; FX headwind estimated at -1% to -3%
• Glyphosate Litigation Provision€9.6 billionAs of Q4 2025; no update this quarter

Impact & implications

Goldman Sachs believes that given the earnings beat and reaffirmed guidance—coupled with Bayer’s underperformance over the past month (-7.6% vs. SXDP -4.5%)—the stock is likely to outperform the market on the report release day. The underlying resilience in Crop Science (even excluding one-time items) and Pharma’s defensive capability against generic erosion bolster investor confidence in achieving full-year targets. However, management chose to reaffirm rather than raise Crop Science guidance due to persistent geopolitical uncertainty, reflecting continued caution.

Risks

• Crop Science segment profitability returning to negative territory
• Greater-than-expected impact from generic competition on Pharma margins, hindering segment profitability
• Adverse outcomes or slower-than-expected resolution in ongoing litigation
• Slower-than-anticipated realization of cost and operational benefits from the new DSO operating model

What to watch

• June 4 opt-out deadline for litigation and subsequent settlement/appeal developments
• Ongoing impact of Middle East conflict on packaging, supply chain, and overall operations
• Sales performance of Eylea biosimilars post-launch in the EU
• Asundexian launch preparations and pricing negotiations with U.S. payers and EU governments
• Speed of Xarelto generic erosion and potential adjustments to peak sales guidance for Nubeqa and Kerendia