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Sigma-Aldrich Q4 Earnings Top on Organic Sales Gain - Analyst Blog

Zacks Equity Research
Updated

Lab chemical and life sciences company Sigma-Aldrich Corporation’s (SIAL) profit for fourth-quarter 2014 rose driven by higher sales across its business segments in the quarter, led by the SAFC Commercial unit.

The Missouri-based company’s profit, as reported, went up 1.5% year over year in the reported quarter to $133 million or $1.11 per share from $131 million or $1.08 per share a year ago.

Barring costs related to restructuring, mergers and acquisitions, earnings were $1.14 per share in the fourth quarter, beating the Zacks Consensus Estimate of $1.09.

For full-year 2014, reported profit rose 1.8% year over year to $500 million or $4.17 per share. Sigma-Aldrich registered record full-year adjusted earnings of $4.37 per share, surpassing the Zacks Consensus Estimate of $4.32.
 

Sigma-Aldrich Corporation - Earnings Surprise | FindTheBest

 

Revenues and Margins

Sales for the reported quarter rose roughly 3% year over year to $705 million, beating the Zacks Consensus Estimate of $700 million. Organic sales gain in the quarter was 7%, the highest in nearly four years. Foreign exchange translation had an unfavorable impact of 5%. However recent acquisitions and divestitures had a favorable impact of 1% on sales.

Sigma-Aldrich registered record full-year 2014 sales, which were up 3% year over year to $2,785 million, coming ahead of the Zacks Consensus Estimate of $2,780 million.

Operating income fell 1.2% year over year to $169 million in the quarter. Adjusted operating income (barring restructuring, mergers and acquisitions costs) for the fourth quarter rose 3% year over year.

Segment Highlights

The Research Chemicals division’s sales were $341 million, up 4% year over year on an organic basis. Healthy gains across all segments (Academic, Pharma and Dealers) and all regions boosted organic sales growth. The fourth quarter also witnessed higher U.S. academic spending.

Applied unit’s sales rose 8% organically to $167 million. The gain was driven by a double-digits rise in diagnostics and testing businesses. Acquisitions had a favorable impact of 3% on sales while changes in foreign currency rates reduced sales by 4%.

Sales from the SAFC Commercial segment were $197 million, up 14% on an organic basis. Sales were driven by double-digit gains in life science products and life science services businesses. Gains in Biopharma and Pharma products,  led by new zinc-finger nuclease licensing agreements and PharmaGrade product sales, contributed to growth in this segment. Higher demand in service sales for gene therapy projects boosted life science products’ sales in the quarter. Sigma-Aldrich reported gains from its integration of BioReliance into SAFC in the fourth quarter.

Financial Health

Sigma-Aldrich ended 2014 with cash and cash equivalents of $958 million, an increase of 32.7% year over year. Long-term debt was flat year over year at $300 million for 2014. Debt-to-capital ratio was 12% as of Dec 31, 2014, compared with 11% as of Dec 31, 2013. For the full year, operating cash flow fell 0.2% year over year to $640 million. Adjusted effective tax rate for 2014 was 26% compared with 27% in 2013.

Sigma-Aldrich did not buy back any shares in the fourth quarter of 2014. However, the company had repurchased around 900,000 shares in the first three quarters of 2014 for roughly $85 million.

Outlook

Moving ahead, Sigma-Aldrich is looking forward to join Germany-based Merck KGaA. The acquisition of Sigma-Aldrich by Merck KGaA, which is subject to specific antitrust and government approvals and other closing conditions, is expected to be completed by mid-2015.

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Zacks Rank

Sigma-Aldrich is a Zacks Rank #3 (Hold) stock.

Better-ranked companies in the specialty chemicals space include Penford Corporation (PENX), Daqo New Energy Corp. (DQ) and NL Industries Inc. (NL). While Penford sports a Zacks Rank #1 (Strong Buy), both Daqo New Energy and NL Industries carry a Zacks Rank #2 (Buy).


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