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Sigma-Aldrich Q4 Earnings Rise on Record Sales

Zacks Equity Research

Lab chemical and life sciences company Sigma-Aldrich’s (SIAL) profit for fourth-quarter 2013 rose as it saw higher sales across its business segments in the quarter, led by the SAFC Commercial unit that ended 2013 on a high note.

The Missouri-based company’s profit, as reported, went up 13% year over year in the reported quarter to $131 million or $1.08 per share from $116 million or 96 cents per share a year ago.

Barring tax benefits of $8 million, earnings were $1.02 per share in the fourth quarter, beating the Zacks Consensus Estimate by a penny.

For full-year 2013, reported profit rose 7% year over year to $491 million or $4.06 per share. Adjusted earnings of $4.12 per share met the Zacks Consensus Estimate and surpassed $3.85 per share recorded a year ago.

Revenues and Margins

Sales for the reported quarter rose roughly 4% year over year to a quarterly record of $684 million, beating the Zacks Consensus Estimate of $675 million. Organic sales gain in the quarter was 6%, while foreign exchange translation had an unfavourable impact of 1%.

Revenues for the full year moved up 3% year over year to $2,704 million, coming ahead of the Zacks Consensus Estimate of $2,695 million.

Operating income rose 4% year over year to $171 million. Adjusted operating margin for the reported quarter was flat year over year at 25%.

Segment Highlights

Research Chemicals division’s sales were $347 million, up 3% year over year on an organic basis. Healthy gains across EMEA (Europe, Middle East and Africa) and APAC (Asia Pacific) regions offset a decline in Total Americas region which was impacted by sequestration. Organic sales gain for Pharma was in the high single-digits continuing a six-quarter trend of sequential improvement. Gain was also witnessed in the dealer business.

Applied unit’s sales rose 6% organically to $156 million. The gain was driven by high single-digits rise in diagnostics and testing business. Industrial sales were up in the low-to-mid single-digits on an organic basis with the Total Americas region mainly contributing to the gain.

Sales from the SAFC Commercial segment were $181 million, up 10% on an organic basis. Sales were driven by double-digit gains in life science products and life science services businesses. Strong gains in contract manufacturing and biopharma materials boosted life science products sales in the quarter. However, Hitech sales declined in the mid single-digits.

Financial Health

Sigma-Aldrich ended 2013 with cash and cash equivalents of $722 million, essentially flat year over year. Long-term debt was also flat year over year at $300 million. Debt to capital ratio was 11% as of Dec 31, 2013, compared with 21% as of Dec 31, 2012. For the full year, operating cash flow rose 13% year over year to $641 million.

The company repurchased 350,000 shares during the fourth quarter for $31 million. It expects to continue to buyback shares to offset dilution associated with stock-based compensation.


Moving ahead, Sigma-Aldrich envisions improving trends in several of its businesses and expects low-to-mid single-digit overall organic sales gain in 2014. It sees low-to-mid single digits gain in its Research Chemicals unit. Sales in Applied and SAFC Commercial divisions are expected to rise in the mid-single digits and mid-to-high single digits, respectively.

Sigma-Aldrich expects adjusted earnings per share for 2014 in the range of $4.30 to $4.40. The current corresponding Zacks Consensus Estimate is $4.37. Adjusted operating income margin has been projected to increase by roughly 50 basis points.

Free cash flow for 2014 has been forecast to exceed $475 million. Capital expenditures are expected to be around $130 million. Operating cash flow for the year has been projected to exceed $600 million. Effective tax rate is expected to be about 27% in 2014.

Sigma-Aldrich is a Zacks Rank #3 (Hold) stock.

Other companies in the specialty chemicals space worth considering are Chemtura Corporation (CHMT), International Flavors & Fragrances Inc. (IFF) and NewMarket Corporation (NEU). All of them carry a Zacks Rank #2 (Buy).

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Read the Full Research Report on IFF
Read the Full Research Report on CHMT
Read the Full Research Report on NEU

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