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Agilent (A) Up 10.5% Since Last Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for Agilent Technologies (A). Shares have added about 10.5% 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 its most recent earnings report in order to get a better handle on the important catalysts.

Agilent's Q2 Earnings Beat Estimates, Revenues Up Y/Y

Agilent Technologies reported second-quarter fiscal 2021 earnings of 97 cents per share, beating the Zacks Consensus Estimate by 18.3%. Further, the bottom line improved 37% year over year but declined 8.5% sequentially.

Revenues of $1.52 billion surpassed the Zacks Consensus Estimate of $1.39 billion. Further, the figure was up 23% on a reported basis and 19% on a core basis from the year-ago quarter. However, it was down 1.5% from the previous quarter.

The year-over-year revenue improvement was driven by strong growth across all regions served and end-markets. Also, solid momentum across all the operating segments contributed well.

In terms of major markets, Analytical Laboratory and Dx& Clinical accounted for 85% and 15% of total revenues, up 21% and 13% on a core basis from the prior-year quarter, respectively.

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 $674 million or 44% of its total revenues, up 28% year over year. This was driven by a strong environment across all the end markets, especially the pharma market. Also, strength in Cell Analysis, Liquid Chromatography and Mass Spectrometry platforms aided the results.

ACG: Revenues from the segment were $536 million, accounting for 35% of total revenues. Also, the top line improved 19% year over year, driven by the solid execution of cross-lab strategy. Also, strengthening momentum in China remained positive.

DGG: Revenues increased 20% year over year to $315 million, accounting for the remaining 21% of total revenues. The topline was driven by solid demand forgenomics instrumentation and consumables.Also, continued strong NASD ramp alongwith recovery in cancer diagnostics drove the results.

Operating Results

For the fiscal second quarter, gross margin in the LSAG segment expanded 130 basis points (bps) on a year-over-year basis to 59.4%.

DGG gross margin contracted 170 bps on a year-over-year basis to 53.4%. Also, ACG gross margin contracted 90 bps to 51.6%.

Research & development costs were $109 million, down 44.7% year over year, while selling, general & administrative expenses were $420 million, up 17.3% year over year.

Operating margin for the fiscal second quarter was 18.9%, which jumped significantly from 8.2%in the year-ago quarter.

Segment-wise, the operating margin for LSAG expanded 420 bps year over year to 22.9%. The DGG segment’s operating margin expanded 30 bps on a year-over-year basis to 21.9%. ACG operating margin was 26.3%, which contracted90 bps from the year-ago quarter.

Balance Sheet

As of Apr 30, 2021, Agilent’s cash and cash equivalents were $1.4 billion, up from $1.3 billion as of Jan 31, 2021.

Accounts receivables were $1.07 billion at the fiscal second-quarter end, down from $1.09 billion at the fiscal first-quarter end.

Further, total debt (short + long term) was $2.9 billion for the reported quarter compared with $2.5 billion in the prior quarter.

Outlook

For the fiscal third quarter, the company expects revenues of $1.51-$1.54 billion.

Non-GAAP earnings per share are expected to be 97-99 cents.

For fiscal 2021, Agilent raised its revenue guidance from $5.825-$5.900 billion to $6.15-$6.21 billion. The company expects the strong momentum across its business to continue.

Also, management revised the non-GAAP earnings guidance upward from $3.80-$3.90 per share to $4.09-$4.14 per share.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended upward during the past month. The consensus estimate has shifted 9.82% due to these changes.

VGM Scores

At this time, Agilent has an average Growth Score of C, a grade with the same score on the momentum front. However, the stock was allocated a grade of F on the value side, putting it in the fifth quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Agilent has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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