On Nov 1, we reiterated our Neutral recommendation on lab
chemical and life sciences company
). While the company should gain from acquisitions and expansion
initiatives, we continue to tread with caution considering
currency headwind and persistent challenges in its research
Sigma-Aldrich's third-quarter 2013 revenues and adjusted
earnings, reported on Oct 22, beat the Zacks Consensus Estimate.
The company saw organic sales gain across all business units in
the quarter. While Sigma-Aldrich backed its sales growth outlook
for 2013, it raised the bottom end of its earnings guidance
citing tax benefits.
Sigma-Aldrich's significant investments in sales, marketing
and R&D initiatives are generating demand for its products.
The company is seeking to take advantage of country-specific
opportunities by expanding its presence in high-growth emerging
markets. It is actively expanding its foothold in the
Asia-Pacific region, especially in the fast-growing emerging
markets of India and China.
The BioReliance acquisition, which extended Sigma-Aldrich's
reach into the promising new market of biologic drugs, should add
to its growth in 2013. The company also remains committed to
offering returns to its shareholders through cash dividends and
share repurchases. Sigma-Aldrich has returned $193 million to its
shareholders in the first nine months of 2013 in the form of
dividends and share repurchases.
However, Sigma-Aldrich's research business, especially with
large pharmaceutical companies, is expected to continue to face
challenges due to weak academic spending in the U.S. and Europe.
National Institutes of Health (NIH) budget uncertainties and the
impact of government spending cuts have weighed on the research
business, exacerbated by the U.S. government shutdown.
Uncertainty surrounding academic funding is expected to sustain
through the balance of 2013.
Moreover, Sigma-Aldrich, which generates roughly 67% of its
sales from the overseas markets, is highly exposed to currency
headwinds. Foreign exchange headwind on earnings is expected to
be around 10 cents per share for 2013.
Other Stocks to Consider
Other companies in the specialty chemical space with a
favorable Zacks Rank are
HB Fuller Co.
). All of these stocks have a Zacks Rank #2 (Buy).
ECOLAB INC (ECL): Free Stock Analysis Report
FERRO CORP (FOE): Free Stock Analysis Report
FULLER(HB) CO (FUL): Free Stock Analysis
SIGMA ALDRICH (SIAL): Free Stock Analysis
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