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The Zacks Analyst Blog Highlights: Sigma-Aldrich, Bayer, Reliance Steel & Aluminum, Metals USA Holdings and Worthington Industries

SIAL BAYRY RS MUSA WOR

 ZacksTrade Now

For Immediate Release

Chicago, IL – August 3, 2012 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include Sigma-Aldrich Corporation (SIAL - Analyst Report), Bayer AG (BAYRY - Analyst Report), Reliance Steel & Aluminum Co. (RS - Analyst Report), Metals USA Holdings Corp. (MUSA - Snapshot Report) and Worthington Industries Inc. (WOR - Snapshot Report).

 

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Here are highlights from Thursday’s Analyst Blog:

 

Sigma-Aldrich Inks Deal

 

Sigma Life Science, the biological products and services arm of Sigma-Aldrich Corporation (SIAL - Analyst Report), announced a deal with Axiogenesis to launch mouse induced pluripotent stem (iPS) cell-derived cardiomyocytes and smooth muscle cells. These cardiomyocytes and smooth muscle cells aid in long-term studies to accurately measure cardiotoxicity in drug trials.

Axiogenesis' iPS cell-derived cardiomyocytes help in diagnosing toxic elements that are not possible through other experiments. These cardiomyocytes also maintain physiologically-relevant biology, purity and spontaneous beating for longer than 28 days. On the other hand, Sigma Life Science's existing stem cell product portfolio provides ample support for iPS cell-related research.

Axiogenesis AG is a biotechnology company that develops novel assays that use differentiated embryonic stem cell that display normal physiological behavior. Axiogenesis is expanding its portfolio through the iPS technology by introducing murine IPS based products and services.

Sigma-Aldrich, a life-science and specialty chemical company, releases its second quarter 2012 earnings last month. The company posted adjusted earnings of 97 cents per share in the quarter, meeting the Zacks Consensus Estimate while exceeding the year-ago earnings of 93 cents. Profit, as reported, marginally increased to $115 million or 94 cents per share in the quarter from $113 million or 91 cents a year ago.

Revenues came in at $664 million in the quarter, up 4% year over year, but below the Zacks Consensus Estimate of $673 million. Acquisitions contributed 6% to the growth while foreign exchange translation had an unfavorable impact of 5%. The company saw growth across its Research Chemicals and Fine Chemicals (“SAFC”) divisions.

Moving ahead, Sigma-Aldrich expects organic growth to be in low-to-mid single digits in 2012, down from the earlier expectation of mid-single-digits. Macroeconomic uncertainties may hinder its Research Chemicals business, whereas growth in Bioscience and Hitech is expected to drive SAFC sales for the remainder of the year. The acquisitions of BioReliance and Research Organics are expected to boost sales by 6%.

The company, which competes with Bayer AG (BAYRY - Analyst Report) and other privately held companies, such as Brenntag AG and VWR Funding Inc., maintains a Zacks #4 Rank, which translates into a short-term (1 to 3 months) Sell rating.

 

 

S&P Raises Reliance Steel’s Rating

 

As reported by Reuters, ratings agency Standard & Poor’s recently raised the ratings of Reliance Steel & Aluminum Co. (RS - Analyst Report), including its senior unsecured debt and corporate credit ratings, to 'BBB' from 'BBB-.’ S&P also maintained a ‘Stable’ outlook for the company’s ratings.

The positive ratings action was based on the size and diversification of the company’s distribution business, which has consistently maintained its margins and improved credit metrics over time. S&P expects this performance to continue in the long term and hence raised the ratings.

The rating upgrade also reflects the demand for Reliance Steel’s products in its important end markets and its ability to maintain steady revenue and EBITDA growth over the past few years even amid a sluggish economic recovery.

Moreover, S&P cited that inorganic growth strategy and improvement in energy and aerospace end markets could help the company mitigate soft demand from non-residential construction markets.

The ratings agency also believes that Reliance’s revenues will grow in the high single-digits this year. Moreover, increased demand is expected to result in a 10% rise in sales volume this year and help offset the negative impact of declining steel prices.

S&P rated the company’s liquidity position as “strong.” Reliance had total liquidity of $705 million, as of June 30, 2012. Moreover, the ratings agency believes that Reliance’s internally generated cash flow of $450-$500 million would suffice its working capital requirements.

In addition, Reliance is well placed to manage its overall debt maturities. The company will likely repay the forthcoming maturity of $75 million of unsecured private placement notes with cash next year. Also, Reliance has complied with the covenants attached to its revolving credit facility quite successfully and would probably sustain the trend over the next two years.

However, S&P said that any near-term ratings upgrade is unlikely owing to Reliance’s inorganic growth strategy and a sluggish nonresidential construction market. Moreover, the ratings might be downgraded in case Reliance takes on excessive debt for financing its acquisitions or returning cash to shareholders. Also, a further decline in steel prices, which would hurt margins, or a deceleration in demand from Reliance’s end markets might result in a downgrade.

We currently have a long-term Outperform recommendation on Reliance Steel. The company, which competes with Metals USA Holdings Corp. (MUSA - Snapshot Report) and Worthington Industries Inc. (WOR - Snapshot Report), maintains a Zacks #3 Rank, which translates into a short-term (1 to 3 months) Hold rating.

 

 

 

 

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