We are maintaining our Neutral recommendation on global lab chemical and life sciences company Sigma-Aldrich Corporation (SIAL) following its mixed fourth-quarter 2011 results. Its earnings of 91 cents a share for the quarter topped the Zacks Consensus Estimate of 89 cents. Sales rose 5% year over year to $610 million, but missed the Zacks Consensus Estimate.

Revenues from Sigma-Aldrich’s Research Chemicals business rose 3% in the fourth quarter. The company’s U.S. research business was affected by the challenging economic conditions and funding uncertainties. Sales from the Fine Chemicals (“SAFC”) division climbed 7% organically in the fourth quarter.

For 2012, Sigma-Aldrich expects its SAFC business to witness low- to mid-single-digit growth in the first half of the year and low-double-digit-growth in the second half due to additional capacity in China and Taiwan. Research growth rates are expected to improve in the back half of 2012, led by stronger growth in the Asia Pacific-Latin American operation.

Sigma-Aldrich’s significant investments in sales, marketing and R&D initiatives are generating demand for its products. To boost growth, the company plans to increase its focus on marketing, business development and R&D, while continuing with its efforts to improve process and operations management. Moreover, Sigma Aldrich is seeking to take advantage of country-specific opportunities by expanding its presence in high-growth emerging markets.

Sigma-Aldrich is actively expanding its foothold in the Asia-Pacific region, especially in the fast-growing emerging markets such as India and China. The company’s latest investment in the 57,000-square-foot Bangalore, India, campus is in sync with this expansion strategy. Sigma-Aldrich expects revenues from its Asia Pacific-Latin American operation to exceed 30% of its total sales over the next 4-5 years.

Moreover, the company’s acquisition of BioReliance is expected to add to its growth in 2012. Sigma-Aldrich also remains committed to offering returns to its shareholders through cash dividends and share repurchases.

However, the company’s core Research Business is expected to face economic challenges in 2012 given the uncertainties across the U.S. and Europe. Its research business in the U.S. remains susceptible to funding uncertainties, especially in the academic customer segment. Also, currency exchange swings are expected to weigh on the company’s bottom line in 2012.

Sigma-Aldrich currently holds a Zacks #4 Rank, which translates into a short-term Sell rating.

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