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We have maintained our Neutral recommendation on Sigma-Aldrich Corporation (SIAL - Analyst Report) following its mixed fourth-quarter 2012 results. Earnings for the quarter beat the Zacks Consensus Estimate but sales missed.

Why Retained?

Acquisitions and gains across international markets led to higher revenues in the fourth quarter. The company registered healthy results in its Fine Chemicals (SAFC) division.

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 the company’s reach into the promising new market of biologic drugs, should add to its growth in 2013. Sigma-Aldrich also remains committed to offering returns to its shareholders through cash dividends and share repurchases.

However, the company’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 funding uncertainties in the U.S. due to budget constraints.

Moreover, Sigma-Aldrich, which generates roughly 67% of its sales from the overseas markets, is highly exposed to currency exchange translation. Negative currency impact on earnings was roughly 22 cents a share for full-year 2012. Unfavorable currency swings may continue to weigh on the company's revenues and earnings.

Sigma-Aldrich currently maintains a Zacks Rank #3 (Hold).

Other Stocks to Consider

Other companies in the specialty chemical space with favorable Zacks Rank are American Pacific Corporation , Novozymes A/S (NVZMY) and Penford Corporation (PENX - Snapshot Report). All of them hold a Zacks Rank #1 (Strong Buy). 

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