Sensient Stock Declines Nearly 8 Percent After Missing Earnings Target
Posted on: Tuesday, 19 July 2005, 15:00 CDT
Jul. 19--The stock price of Milwaukee-based Sensient Technologies Corp. (stock: SXT) dropped nearly 8 percent Monday after second-quarter earnings fell short of analysts' estimates, and the company lowered estimates for its 2005 earnings.
Sensient, which makes flavors, colors and fragrances, closed trading at $19.87 per share, down $1.71, on heavy volume.
The company reported a 13 percent decline in second-quarter profit, citing higher costs for energy and raw materials, combined with flat sales.
Sensient earned $15.9 million, or 34 cents per diluted share, compared with $18.2 million, or 39 cents a share, from the second quarter in 2004. The company reported revenue of $263.8 million, unchanged from the quarter last year.
John McMillin, an analyst at Prudential Equity Group LLC in New York, had estimated that Sensient would earn 40 cents a share. McMillin's note to investors says Sensient's biggest problems are in its color segment, in which revenue was down 7 percent and operating income dropped 17 percent.
That stemmed mainly from the loss of a key customer -- most likely Hewlett-Packard Co., which buys colors for its ink jet printers, McMillin says. The head of Sensient's color segment was replaced last week, giving that operation its fourth top executive in five years, he writes.
McMillin also says Sensient's operating income was well below expectations, with operating margins of 11.6 percent, compared with 12.9 percent a year ago.
McMillin writes that at the company's annual meeting in April, Sensient management was optimistic that operating margins would improve this year. Management at the meeting should have better realized some of the higher costs blamed for the disappointing earnings report, McMillin says.
Sensient said it now expects to earn from $1.37 to $1.40 per share in 2005, down from the previous estimate of $1.57 to $1.60.
For the first six months of the year, Sensient earned $28.7 million, or 61 cents a share, down 14 percent from $33.2 million, or 71 cents a share. Revenue was $514.6 million, down 0.6 percent from $518 million.
In a statement, Sensient Chairman Kenneth Manning said the company's focus on cash flow and debt reduction produced significant progress in strengthening its balance sheet.
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SXT, HPQ,
Source: The Milwaukee Journal Sentinel
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