Sensient Technologies Corporation
) recently reported earnings of 66 cents per share in third
quarter 2012, in line with the Zacks Consensus Estimate and 3.1%
higher than the year-ago level of 64 cents per share. Reported
earnings include unfavorable currency impact of 3 cents.
Excluding impact of foreign currency, earnings-per-share were 5
cents, up 7.8% in the quarter.
Total revenue jumped only 1.5% year over year to $369.4 million
during the quarter, due to unfavorable foreign currency
translation. However, in local currency, revenue climbed up 5.0%.
During the quarter, sales at the Color Group segment slipped 0.3%
year over year to $120.7 million, but in constant currency, it
grew 5%. However, despite the adverse currency impact of 3.4%,
revenue at Flavors & Fragrances Group increased 2.0% to
Moreover, revenue at Corporate & Other, which includes the
company's operations in Asia-Pacific and China as well as the
company's flavor businesses in Central and South America, grew
8.4% to $40.8 million, benefiting from solid performances in
Thailand, Singapore and Philippines.
MCCORMICK & CO (MKC): Free Stock Analysis
SENSIENT TECH (SXT): Free Stock Analysis
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Operating income of the Color Group segment leaped 2.5% to $23.5
million, with operating margin expanding 50 basis points to
19.4%, helped by an improved product mix. However, Flavors &
Fragrances Group operating income contracted 4.0% to $31.8
million, due to customer inventory de-stocking and increased
Selling and administrative expenses scaled up 3.4% to $67.0
million and cost of products sold spiked 1.1% to $251.8 million.
Though, operating income of the company advanced 1.5% year over
year to $50.7 million and in local currency increased 8%.
The company also plans to make significant investments in
Johannesburg, South Africa, to build a new color and flavor
complex. Management believes that the new facility will enhance
growth and bolster its position in the African market.
The company ended the quarter with cash flow from operations of
$43.1 million, up from $39.7 million in the prior-year period,
thanks to the higher cash earnings. As of September 30, 2012,
long-term debt stood at $328.8 million, up from $301.1 million as
of September 30, 2011. The debt to capital ratio improved to
23.7% at September 30, 2012, from 23.8% at September 30, 2011.
Despite the challenging economic conditions, Sensient continues
to invest in the business to upgrade its facilities and develop
new technologies. The company currently has several capital
projects in progress to expand capabilities and improve
efficiencies. Capital expenditures in the third quarter of 2012
were $20 million, flat year over year.
For 2012, the company narrowed its earnings per share outlook to
$2.51 to $2.56 from its previous estimate of $2.50 to $2.59 per
As the company reduced its outlook for 2012, we expect analysts
to trim estimates for 2012. The Zacks Consensus Estimates for the
upcoming quarter and fiscal 2012 are 61 cents and $2.54 per
share, respectively, reflecting a year-over-year growth of 7.60%
and 4.75%. However, we remain optimistic on the stock given its
strategic investments in infrastructure and expansion in the
African market .
Sensient, which competes with
McCormick & Company, Inc.
), carries a Zacks #3 Rank, implying a short-term Hold rating. We
are also maintaining our long-term Neutral recommendation on the