Sigma-Aldrich Beats, Lowers Earnings View - Analyst Blog

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Lab chemical and life sciences company Sigma-Aldrich Corp. ( SIAL ) posted adjusted earnings of $1.05 per share in the second quarter of 2013, above the year-ago earnings of 97 cents. The results beat the Zacks Consensus Estimate of $1.03. The adjusted earnings exclude other charges of 7 cents a share.

Profit, as reported, rose roughly 3.5% year over year to $119 million (or 98 cents per share) in the quarter from $115 million (or 94 cents per share) a year ago.

Revenues and Margins

Net sales increased 3% year over year to $681 million in the reported quarter, surpassing the Zacks Consensus Estimate of $679 million. Organic sales growth in the quarter was 4%, while foreign exchange translation had a negative impact of 1%.

Adjusted operating margin for the second quarter was 26.1% compared with 25.8% recorded a year ago. Adjusted operating margin in the reported quarter excludes other charges of $12 million related to merger/acquisition activity and settlement of a licensing dispute.

Segment Highlights

Research Chemicals sales were $353 million, up 3% on an organic basis. The year over year increase is mainly due to growth in emerging regions, especially China. Organic sales growth through the dealer network was in the mid single-digits. However, pharma organic sales growth was in the low-to-mid single-digits continuing a four-quarter trend of sequential improvement.

Applied business unit's sales amounted to $160 million. Organic sales increased 6% driven by high single-digits growth in Diagnostics and Testing division. However, Industrial sales growth was in the low-to-mid single-digits. The year over year improvement is also attributable to the launch of the new business unit, led by multiple Diagnostic and Testing wins in standards and OEM sales.

Sales from the SAFC Commercial segment were $168 million. Organic sales rose 2%, driven by strong growth in contract manufacturing and biopharma segment. However, Hitech sales declined because of challenging chemical precursor market for the LED industry. The industrial cell culture media business performed well in the quarter.

Financial Health

Sigma-Aldrich's cash and cash equivalents stood at $562 million as of Jun 30, 2013, compared with $572 million as of Jun 30, 2012. Long-term debt remained flat year over year at $300 million. Debt to capital ratio was 14% as of Jun 30, 2013, compared with 24% as of Jun 30, 2012. For the first half of 2013, operating cash flow jumped 19% to $269 million.

The company repurchased 0.35 million shares during the second quarter for $29 million. It expects to continue to buyback shares to offset dilution associated with stock-based compensation.

Guidance

Sigma-Aldrich reiterated its overall organic sales growth guidance for 2013. The company expects low-to-mid single-digit organic sales gain in 2013. However, Sigma-Aldrich lowered its adjusted earnings per share guidance from the previous range of $4.10 to $4.20 to a new band of $4.05 to $4.15 for the year, citing incremental changes in foreign currency exchange rates.

Free cash flow expectations for the full year have also been reaffirmed by Sigma-Aldrich, which is expected to exceed $430 million. Capital expenditures guidance also remains same at around $130 million. Operating cash flow has been projected to exceed $560 million. Effective tax rate is expected to be about 28% in 2013.

Sigma-Aldrich is expected to move forward to capital deployment for mergers/acqusitions, dividends and share repurchases to generate long-term shareholder value. BioReliance acquisition and expansion initiatives in Asia Pacific and other high growth markets are expected to add to Sigma-Aldrich's growth in 2013. However, unfavorable currency exchange translation may continue to weigh on its revenues and earnings.

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

Ferro Corp. ( FOE ), which also belongs to the specialty chemical industry, carries a Zacks Rank #2 (Buy).

Other specialty chemical companies such as OM Group Inc. ( OMG ) and Rockwood Holdings, Inc. ( ROC ) will announce their quarterly results on Aug 1 and Aug 5, respectively.



FERRO CORP (FOE): Free Stock Analysis Report

OM GROUP INC (OMG): Free Stock Analysis Report

ROCKWOOD HLDGS (ROC): Free Stock Analysis Report

SIGMA ALDRICH (SIAL): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Earnings , Stocks

Referenced Stocks: FOE , OMG , ROC , SIAL

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