Agilent (A) Up 6.5% 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 6.5% 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 drivers.

Agilent Q1 Earnings & Revenues Surpass Estimates

Agilent Technologies reported first-quarter fiscal 2022 earnings of $1.21 per share, beating the Zacks Consensus Estimate by 3.4%. Further, it increased 14.2% year over year. The bottom line was in line with the prior quarter’s reported figure.

Revenues of $1.67 billion surpassed the Zacks Consensus Estimate by 1.3%. Further, the figure was up 8% on a reported basis and 9% on a core basis from the year-ago quarter. In addition, the figure improved 0.8% from the previous quarter.

The year-over-year increase in revenues was driven by continued strong growth in the pharma market. Also, solid momentum across all operating segments contributed well.

In terms of major markets, Analytical Laboratory and Dx & Clinical accounted for 85% and 15% of total revenues, up 9% and 11% on a core basis, respectively, from the prior-year quarter.

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 $976 million or 58% of its total revenues, up 6% year over year. This was driven by a positive environment across key end-markets served, especially the Pharma and Chemical & Energy market. Also, strength in Consumables, Spectroscopy, Liquid Chromatography and Mass Spectrometry platforms aided the results.

ACG: Revenues from the segment were $359 million, accounting for 22% of total revenues. Also, the top line improved 8% year over year, driven by strong contract revenues across the portfolio. Also, strong growth across all regions and end-markets served remained a tailwind.

DGG: Revenues increased 15% year over year to $339 million, accounting for the remaining 20% of total revenues. The top line was driven by strength in NASD genomics and cancer diagnostics businesses.

Operating Results

For the fiscal first quarter, gross margin in the LSAG segment expanded 20 basis points (bps) on a year-over-year basis to 60.5%. DGG gross margin expanded 120 bps on a year-over-year basis to 52.8%. ACG gross margin expanded 70 bps to 47.5%.

Research & development costs were $117 million, up 13.6% year over year. Selling, general & administrative expenses were $417 million, which increased 2.5% year over year.

Operating margin for the fiscal first quarter was 26.3%, which expanded 80 bps on a year-over-year basis.

Segment-wise, operating margin for LSAG expanded 30 bps year over year to 28.9%. The DGG segment’s operating margin expanded 150 bps on a year-over-year basis to 20.1%. ACG operating margin was 25.2%, which expanded 210 bps from the year-ago quarter.

Balance Sheet

As of Jan 31, 2022, Agilent’s cash and cash equivalents were $1.11 billion, down from $1.48 billion on Oct 31, 2021.

Accounts receivables were $1.21 billion at the end of fiscal first-quarter 2022, up from $1.17 billion at the end of fourth-quarter fiscal 2021.

Further, long-term debt was $2.730 billion for the reported quarter compared with $2.729 billion in the prior quarter.

Outlook

For the fiscal second quarter, the company expects revenues of $1.595-$1.625 billion, suggesting year-over-year growth between 6.5% and 8.5% on a core basis.

Non-GAAP earnings per share are expected to be $1.10-1.12.

For fiscal 2022, Agilent raised its revenue guidance from $6.65-$6.73 billion to $6.67-$6.73 billion, implying growth of 5.6-6.5% on a reported basis and 7-8% on a core basis from fiscal 2021.

Also, management raised its guidance for non-GAAP earnings per share from $4.76-$4.86 to $4.80-$4.90.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision.

VGM Scores

At this time, Agilent has an average Growth Score of C, a grade with the same score on the momentum front. Charting a somewhat similar path, 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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