We are maintaining our Neutral recommendation on lab chemical
and life sciences company
). While the company may gain from acquisitions and expansion
initiatives, we remain on the sidelines considering currency
headwind and continued challenges in its research business.
Sigma-Aldrich's second-quarter 2013 revenues and adjusted
earnings, reported on Jul 23, beat Zacks Consensus Estimates. The
company saw organic sales gain across all business units in the
quarter. While Sigma-Aldrich backed its sales growth guidance for
2013, it cut its earnings forecast citing incremental currency
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 returned $108 million to its
shareholders in first-half 2013 in form of dividends and share
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.
The company expects uncertainty surrounding academic funding (in
particular in the U.S. due to sequestration) 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. The company has reduced its earnings outlook for 2013
factoring in the incremental foreign exchange headwind. Earnings
headwind is now expected to be 10 cents per share for the year
versus 5 cents expected earlier.
Other Stocks to Consider
Other companies in the specialty chemical space with favorable
Zacks Rank are
Quaker Chemical Corp.
Sensient Technologies Corp.
). All of them retain a Zacks Rank #2 (Buy).
FERRO CORP (FOE): Free Stock Analysis Report
QUAKER CHEMICAL (KWR): Free Stock Analysis
SIGMA ALDRICH (SIAL): Free Stock Analysis
SENSIENT TECH (SXT): Free Stock Analysis
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