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Sigma-Aldrich Beats by a Penny

Zacks Equity Research

Lab chemical and life sciences company Sigma-Aldrich Corporation (SIAL) posted adjusted earnings (excluding items) of 96 cents per share in the fourth quarter of 2012, above the year-ago earnings of 91 cents. The results beat the Zacks Consensus Estimate of 95 cents. Currency exchange swings reduced adjusted earnings by 6 cents a share in the reported quarter,

Profit, as reported, rose roughly 7% year over year to $116 million (or 96 cents per share) in the quarter from $108 million (or 89 cents per share) a year ago. Acquisitions (including BioReliance) and gains across overseas markets aided the results.

For full-year 2012, adjusted earnings (barring restructuring and acquisition charges) were $3.85 per share, comfortably beating the Zacks Consensus Estimate of $3.72. Reported earnings were $3.77 per share, up 1% from $3.72 per share posted a year ago.
Revenues and Margins
Revenues rose 7% year over year to $655 million in the quarter, yet fell behind the Zacks Consensus Estimate of $660 million. Acquisitions added 6% to sales while foreign exchange translation had a negative impact of 2%. Asia Pacific, Latin America and EMEA (Europe, Middle East and Africa) recorded mid single-digit gains while North American sales were flat in the quarter.
Adjusted operating margin (excluding restructuring costs) for the fourth quarter was 25.2% compared with 26.2% recorded a year ago.  

For the full year, sales rose 5% year over year to $2,623 million, essentially in line with the Zacks Consensus Estimate.
Segment Highlights
Research Chemicals revenues edged up 2% on an organic basis to $431 million in the quarter. On a reported basis, sales from the division inched up 1%. Global sales of research products through the company's e-commerce channels rose 6% organically in the quarter.

The Fine Chemicals (SAFC) business sales rose 5% organically to $224 million. On a reported basis, sales surged 17%. Booked orders rose 2% year over year in the quarter. The division, however, witnessed some pricing pressure (related to the new Hitech facility in Taiwan) in the quarter.

Financial Health
Sigma-Aldrich ended 2012 with cash and cash equivalents of $724 million, a roughly 9% year over year increase. Long-term debt remained flat year over year at $300 million. Debt to capital ratio was 21% as of Dec 31, 2012, compared with 19% as of Dec 31, 2011. Operating cash flow for the year jumped nearly 15% year over year to $567 million.

The company repurchased 0.4 million shares during the fourth quarter for $25 million. It expects to continue to buyback shares to offset dilution associated with stock-based compensation.
Sigma-Aldrich expects low-to-mid single digit organic sales gain in 2013. It envisions adjusted earnings per share in the band of $4.10 to $4.20 for the year. The current Zacks Consensus Estimate of $4.18 is within this guidance range.

To better address the needs of its customers, the company, in Nov 2012, realigned its business into three market-focused units – Research, Applied, and SAFC Commercial.

Sigma-Aldrich expects sales from its Research unit to increase in the low single-digit clip organically in 2013. The Applied unit is forecast to deliver mid single-digit sales gain. Revenues from the SAFC business are expected to rise in the mid-to-high single digits in the year.

Free cash flow forecast for the full year is more than of $430 million. Capital expenditures are expected to be roughly $130 million while operating cash flow has been projected to exceed $560 million.

Sigma-Aldrich’s BioReliance acquisition and expansion initiatives in Asia Pacific and other high growth markets are expected to continue to add to its growth. However, the company’s research business is still facing economic challenges due to uncertainties in the U.S. and Europe.
Sigma-Aldrich currently maintains a Zacks Rank #3 (Hold).

Other companies in the specialty chemical space with favorable Zacks Rank are American Pacific Corporation (APFC), American Vanguard Corp. (AVD) and Penford Corporation (PENX). All of them hold a Zacks Rank #1 (Strong Buy). 

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Read the Full Research Report on AVD

Read the Full Research Report on APFC

Read the Full Research Report on PENX

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