Sigma-Aldrich (SIAL) Beats on Earnings, Misses on Revenues


Lab chemical and life sciences company Sigma-Aldrich (SIAL) posted higher profits in second-quarter 2014 on increased sales, supported by continued healthy momentum in its Applied business unit.

Sigma-Aldrich reported second-quarter earnings of $1.11 per share, an increase of 13% from 98 cents reported in second-quarter 2013. Adjusted earnings in the reported quarter were also $1.11 per share compared to $1.05 per share a year ago, an increase of 6%. It beat the Zacks Consensus Estimate by a penny.

Revenues and Margins

Sales for the quarter were up 3% year over year to $701 million but missed the Zacks Consensus Estimate of $705 million. Organic sales gain in the quarter was 2%, while changes in foreign currency exchange rates had an unfavorable impact of 1%.

Operating income increased 10.8% from the year-ago quarter to $184 million. Adjusted operating margin for the reported quarter was 26.4%, up 30 basis points from a year ago, despite headwinds from currency translations.



Segment Highlights

The Research Business division’s sales increased 1% year over year to $357 million in the quarter. Though sales in the division remained flat organically, changes in currency translation had a positive impact of 1%.

Research sales in the Academic/Government/Hospitals segment fell by low single digits from the same period last year. Though sales in the U.S. improved, academic sales remained weak in both the Europe, Middle East and Africa (:EMEA) and Asia Pacific (:APAC) regions.

Also, organic sales growth in the Pharma segment remained flat in the second quarter with low single-digit growth in the U.S. and EMEA.

Gains were witnessed across the U.S region due to improved academic and pharma environment while sales fell in the EMEA region on weak academic spending.

Applied unit’s sales rose 7% (6% organically) to $172 million. The gain was driven by high single-digits rise on an organic basis in diagnostics and testing business with contribution from all regions, led by solid performance in the APAC region. Organic sales growth in the Industrial segment remained in low single digits.

Sales from the SAFC Commercial segment were up 2% (1% organically) to $172 million over the second quarter of 2013. Currency translations impacted sales positively by 2% while divestitures decreased sales by 1%.

Sales fell in low-to-mid single digits organically in the Life Science Products business while Life Science Services saw a double-digit rise on gains in Biopharma services. However, Hitech sales remained flat due to weakness in LED precursors.


Sigma-Aldrich exited the quarter with cash and cash equivalents of $810 million. Long-term debt was flat year over year at $300 million. Debt-to-capital ratio was 10% as of Jun 30, 2014, compared with 11% as of Dec 31, 2013. Operating cash flow increased around 6.7% year over year to $287 million for the first six months of 2014.

Sigma-Aldrich repurchased 900,000 shares during the first half of 2014 for $85 million. It expects to continue to buy back shares to offset dilution associated with stock-based compensation.


Sigma-Aldrich retained its previous outlook for the second half of 2014.  The company now expects adjusted earnings per share for 2014 in the range of $4.32 to $4.40 compared to the previous range of $4.30 to $4.40. The current corresponding Zacks Consensus Estimate stands at $4.37 per share.

Moreover, the company envisions low single-digit overall organic sales gain in 2014. It foresees low-to-mid single-digit sales gain in its Research unit for the second half. Sales in Applied and SAFC Commercial divisions are expected to rise in the mid-single digits.

Operating cash flow for 2014 has been projected to exceed $600 million. Free cash flow for the year has been forecast to exceed $475 million. Capital expenditures are expected to be around $130 million for 2014. Adjusted operating income margin has been projected to increase by roughly 50 basis points.

Sigma-Aldrich currently carries a Zacks Rank #4 (Sell).

Better-ranked stocks in the specialty chemicals space include Green Plains Inc. (GPRE), Minerals Technologies Inc. (MTX) and BioAmber Inc. (BIOA). While Green Plains and Minerals Technologies sport a Zacks Rank #1 (Strong Buy), BioAmber holds a Zacks Rank #2 (Buy).

Read the Full Research Report on SIAL
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