We are maintaining our Neutral recommendation on global lab
chemical and life sciences company
) following its mixed fourth-quarter 2011 results. Its earnings of
91 cents a share for the quarter topped the Zacks Consensus
Estimate of 89 cents. Sales rose 5% year over year to $610 million,
but missed the Zacks Consensus Estimate.
Revenues from Sigma-Aldrich's Research Chemicals business rose
3% in the fourth quarter. The company's U.S. research business was
affected by the challenging economic conditions and funding
uncertainties. Sales from the Fine Chemicals ("SAFC") division
climbed 7% organically in the fourth quarter.
For 2012, Sigma-Aldrich expects its SAFC business to witness
low- to mid-single-digit growth in the first half of the year and
low-double-digit-growth in the second half due to additional
capacity in China and Taiwan. Research growth rates are expected to
improve in the back half of 2012, led by stronger growth in the
Asia Pacific-Latin American operation.
Sigma-Aldrich's significant investments in sales, marketing and
R&D initiatives are generating demand for its products. To
boost growth, the company plans to increase its focus on marketing,
business development and R&D, while continuing with its efforts
to improve process and operations management. Moreover, Sigma
Aldrich is seeking to take advantage of country-specific
opportunities by expanding its presence in high-growth emerging
Sigma-Aldrich is actively expanding its foothold in the
Asia-Pacific region, especially in the fast-growing emerging
markets such as India and China. The company's latest investment in
the 57,000-square-foot Bangalore, India, campus is in sync with
this expansion strategy. Sigma-Aldrich expects revenues from its
Asia Pacific-Latin American operation to exceed 30% of its total
sales over the next 4-5 years.
Moreover, the company's acquisition of BioReliance is expected
to add to its growth in 2012. Sigma-Aldrich also remains committed
to offering returns to its shareholders through cash dividends and
However, the company's core Research Business is expected to
face economic challenges in 2012 given the uncertainties across the
U.S. and Europe. Its research business in the U.S. remains
susceptible to funding uncertainties, especially in the academic
customer segment. Also, currency exchange swings are expected to
weigh on the company's bottom line in 2012.
Sigma-Aldrich currently holds a Zacks #4 Rank, which translates
into a short-term Sell rating.
SIGMA ALDRICH (
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