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What's in Store for Sigma-Aldrich (SIAL) in Q3 Earnings?

Sigma-Aldrich CorporationSIAL is expected to release third-quarter 2015 results on Oct 22, 2015.

In the last quarter, this lab chemical and life sciences company had delivered a negative earnings surprise of roughly 9.8% due to the unfavorable impact of foreign exchange translation. Let's see how things are shaping up for this announcement.

Factors to Consider

Sigma-Aldrich reported weak second-quarter 2015 results, with its revenues dropping 0.6% and operating income declining 8.2% year over year. Overall results as well as the company's segments were adversely affected by the unfavorable impact of foreign exchange translation.

Sigma-Aldrich is looking forward to joining Germany-based Merck KGaA. The company is progressing toward the completion of its proposed acquisition by Merck KGaA. Sigma-Aldrich, in Aug 2015, obtained an unconditional approval from Brazil's Council for Economic Defense, the final outstanding sanction needed for the transaction. The approval followed the antitrust clearances from the competition authorities of Israel and South Korea. The deal was also cleared by the European Commission and Chinese Ministry of Commerce in Jun 2015.

The merger will create a major player in the $130 billion global life sciences industry. The integrated company will be able to cater to life science customers globally, with a highly attractive set of established brands and an efficient supply chain which can facilitate the delivery of over 300,000 products. Customers will benefit from the offering of a vast array of complementary products and capabilities.

Moreover, the company's significant investments in sales, marketing and research and development (R&D) initiatives are creating demand for its products. The company plans to continue increasing its marketing, business development and R&D focus to fully leverage its sales force and sustain its growth efforts.

The BioReliance acquisition and expansion initiatives in the Asia Pacific and other high growth markets are expected to add to Sigma-Aldrich's growth, going forward. The company should also gain from its cost-reduction measures.

However, the current uncertainty in the global markets reduces visibility. Sigma-Aldrich is witnessing only a modest improvement in end markets, especially Pharma. Weak spending from major pharmaceutical and biotech customers may affect growth in its Research segment.

Sigma-Aldrich's research business, especially with large pharmaceutical companies, is expected to continue to face economic challenges, given the uncertainties across the U.S. and Europe. Its research sales remain affected by the funding uncertainties in the U.S. due to budget constraints. Moreover, unfavorable currency exchange translation may continue to weigh on its sales and margins.

Earnings Whispers

Our proven model does not conclusively show that Sigma-Aldrich is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. This is not the case here, as you will see below:

Zacks ESP: Earnings ESP for Sigma-Aldrich is currently pegged at 0.00%. This is because the Most Accurate estimate and the Zacks Consensus Estimate both is pegged at $1.06.

Zacks Rank: Sigma-Aldrich carries a Zacks Rank #3 (Hold), which increases the predictive power of ESP. However, the company's ESP of 0.00% makes surprise prediction difficult.

We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks that Warrant a Look

Here are some other companies in the basic materials sector you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Franco-Nevada Corporation FNV has an Earnings ESP of +7.14% and a Zacks Rank #3 (Hold).

The Chemours Company CC has an Earnings ESP of +6.90% and a Zacks Rank #3.

Commercial Metals Company CMC has an Earnings ESP of +4.65% and a Zacks Rank #3.

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SIGMA ALDRICH (SIAL): Free Stock Analysis Report

FRANCO NV CP (FNV): Free Stock Analysis Report

COMMERCIAL METL (CMC): Free Stock Analysis Report

CHEMOURS COMPNY (CC): 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 Nasdaq, Inc.


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

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