Agilent (A) Up 7.6% Since Last Earnings Report: Can It Continue?
A month has gone by since the last earnings report for Agilent Technologies (A). Shares have added about 7.6% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Agilent due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Agilent Q1 Earnings Beat Estimates
Agilent Technologies delivered first-quarter fiscal 2024 earnings of $1.29 per share, which beat the Zacks Consensus Estimate by 6.6%. However, the bottom line decreased 6% from the year-ago quarter.
Revenues of $1.66 billion surpassed the Zacks Consensus Estimate of $1.57 billion. However, the top line declined 5.6% on a reported basis and 6.4% on a core basis from the year-ago quarter’s levels.
The decline was attributed to broad-based weakness across all end markets, especially in Pharma, Chemistry & Advanced Materials, Food, and Diagnostics and Clinical markets.
Weak momentum in China was another major concern.
Segmental Top-Line Details
Agilent has three reporting segments — Life Sciences & Applied Markets Group (“LSAG”), Agilent Cross Lab Group (“ACG”) and Diagnostics and Genomics Group (“DGG”).
LSAG: The segment accounted for $846 million or 51% of the company’s total revenues, down 10% on a reported basis and 11% on a core basis from the prior-year quarter. This was due to macroeconomic uncertainties, and sluggish capital equipment spending by customers. The reported figure missed the Zacks Consensus Estimate of $849 million.
Nevertheless, the company witnessed strength in applied markets and consumables.
ACG: Revenues from the segment were $405 million, accounting for 24% of the total revenues. The figure surpassed the consensus mark of $385 million. The top line improved 6% from the prior-year quarter on a reported basis and rose 5% on a core basis, demonstrating solid momentum across all end markets and regions, except for China. Strength in enterprise service contracts, which drove growth in contract revenues, remained another positive.
DGG: Revenues decreased 6% from the prior-year quarter on a reported and core basis to $407 million, accounting for the remaining 25% of the total revenues. The figure beat the consensus mark of $332 million. Sluggishness in NGS reagents and increased clinical business mix at NASD were concerning.
Nevertheless, strength in the pathology business was a positive.
Operating Results
For the fiscal first quarter, the gross margin in the LSAG segment contracted by 130 basis points (bps) to 60.2% from the prior-year quarter. ACG’s gross margin expanded by 200 bps to 50.5%. DGG’s gross margin expanded by 20 bps from the year-ago quarter to 52.8%.
Research and development (“R&D”) costs were $128 million, up 4.1% from the prior-year quarter. Selling, general and administrative (“SG&A”) expenses were $396 million, down 5.5% from the year-earlier quarter. As a percentage of revenues, R&D expenses expanded by 70 bps year over year to 7.7%, while SG&A expenses remained flat year over year at 23.9%.
The operating margin for the fiscal first quarter was 23.2%, which contracted 110 bps from the year-earlier quarter.
Segment-wise, the operating margin in the LSAG segment contracted by 390 bps to 27.9% from the prior-year quarter. ACG’s operating margin expanded by 320 bps to 30.2%. DGG’s operating margin expanded by 40 bps from the year-ago quarter to 17.3%.
Balance Sheet & Cash Flow
As of Jan 31, 2024, Agilent’s cash and cash equivalents were $1.75 billion, up from $1.59 billion as of Oct 31, 2023.
Accounts receivables were $1.295 billion at the end of first-quarter fiscal 2024 compared with $1.291 billion at the end of fourth-quarter fiscal 2023.
Long-term debt was $2.555 billion for the reported quarter, down from $2.735 billion in the prior quarter.
Agilent generated $485 million in cash from operations in the reported quarter, down from $516 million in the previous quarter.
The company made dividend payments worth $69 million in the fiscal first quarter.
Guidance
For the second quarter of fiscal 2024, management expects revenues of $1.560-$1.590 billion, suggesting a decline of 9.1-7.4% on a reported basis and 8.4-6.7% on a core basis from the year-ago quarter.
Non-GAAP earnings per share are expected to be $1.17-$1.20.
For fiscal 2024, management expects revenues of $6.710-$6.810 billion, implying a fall of 1.8-0.3% on a reported basis from the fiscal 2023 reported figure.
Fiscal 2024 non-GAAP earnings per share are projected to be $5.44-$5.55.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month.
The consensus estimate has shifted -6.74% due to these changes.
VGM Scores
At this time, Agilent has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Agilent has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Agilent Technologies, Inc. (A) : Free Stock Analysis Report
