Sigma-Aldrich reported third-quarter results in line with our expectations. Management increased the lower end of its EPS outlook on a favorable tax benefit, which is generally consistent with our EPS estimate for the year. Regardless, the company’s low-single-digit revenue growth trajectory remains on track with our forecast, and we’re leaving our fair value estimate and economic moat rating unchanged.

Sigma’s organic revenue grew 5% from the year-ago period thanks to 3%, 4%, and 8% growth in its research, applied, and SAFC segments, respectively. Although growth remains subdued, the company’s growth trend is improving as economic conditions and government budget concerns ease. In the research segment, the U.S. budget sequester and recent government shutdown will remain headwinds in the near term, but management noted stronger demand from the company’s international market dealers as well as pharmaceutical customers.

Stronger than expected growth in the SAFC segment was driven by double-digit life science product and service growth, offset by ongoing declines in the LED portion of the Hitech unit. We may revisit our assumptions for Sigma’s life science segment where demand for its products, including this quarter’s demand in cell culture and high-potency API products, could become an important growth driver for the company. Management continues to make infrastructure investments in its life science product and service offerings, including expanded antibody-drug conjugate capacity and service laboratories for bio pharmaceutical testing in the U.S. during the quarter.