Q1 2026 results have been fairly encouraging. Bayer reported growth of 4.1% on a currency- and portfolio-adjusted basis, driven notably by Crop Science. EBITDA before special items rose by 9% to €4.45bn, a sign that operational leverage is gradually returning.
The group's primary engine is agrochemicals. Crop Science accounts for nearly 50% of Bayer's revenue, ahead of pharmaceuticals and consumer health. This division is benefiting from better momentum in seeds and genetic traits (particularly in soybeans and corn) and improved cost discipline.
However, not everything is perfect. Crop protection remains under pressure: competition from generics, deferred purchases, and a still-tense agricultural environment. Yet, for the first time in a long while, Bayer gives the impression of regaining control over its industrial destiny.
Pharmaceuticals in Reconstruction
Bayer must manage the erosion of its former blockbusters, notably Xarelto, affected by the loss of patent protection, and Eylea, facing pressure from biosimilars. This type of transition is common in the pharmaceutical sector, but it comes at the wrong time for Bayer, which is already weakened.
At the same time, the company is attempting to rebuild its portfolio with Nubeqa and Kerendia. These products are reporting reassuring growth, although they have yet to prove that they can replace the former flagship drugs. Pharmaceuticals remains one of the group's pillars, although no longer offers the same security as before.
The Monsanto Poison
The real stockmarket issue lies elsewhere: Bayer cannot be valued as a normal group as long as the Monsanto litigation continues to weigh on visibility. Glyphosate is indeed a thorn in its side: with every improvement in results, the question of legal bill arises.
The paradox of the quarter lies here. Bayer is starting to run better, although free cash flow came in at -€2.3bn, weighed on by about €2bn in payments relating to glyphosate and PCB litigation. In other words, the group is recovering, although its past is costing it dearly.
Excessive Debt
Debt is Bayer's other weakness. Net debt is expected to be around €32bn in 2026, a level that leaves little leeway.
With such a heavy balance sheet, Bayer has not returned to being a yield stock. The dividend (currently €0.11 per share) remains very low in the near term, with an estimated yield of just 0.57% for 2026. For the shareholder, the challenge lies in the group's ability to normalize its cash flow once the cost of litigation is better contained.
A Concerning Discount
On the stock market, Bayer had an enterprise value (market cap + debt) of over €90bn in 2017, before the acquisition of Monsanto for some €54bn, undoubtedly "one of the greatest strategic errors of modern capitalism," as a colleague pointed out. The combined group is now worth around €70bn including debt. The market continues to associate Bayer with legal risk and value destruction before looking at operational progress.
However, multiples remain lower than those of several comparable players in agrochemicals or healthcare. Bayer is trading at around 11.9x expected 2027 earnings, compared to over 25x for Corteva and 17.7x for Novartis.
Convalescence, Not Cure
The market remains generally positive without being euphoric. The consensus has "add," ratings, with an average target price of €48.58, representing nearly 29% upside potential compared to its last listed price. Meanwhile, mwb research targets €52, estimating that the current valuation already incorporates legal risks. Bayer thus remains halfway between operational progress that is becoming visible and a legal risk that struggles to fully convince the markets.
