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Agilent (A) Up 6.6% Since Last Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for Agilent Technologies (A). Shares have added about 6.6% 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 its most recent earnings report in order to get a better handle on the important catalysts.

Agilent (A) Q3 Earnings & Revenues Surpass Estimates

Agilent Technologies reported third-quarter fiscal 2021 earnings of $1.10 per share, beating the Zacks Consensus Estimate by 11.1%. Further, the bottom line improved 41% year over year and 13.4% sequentially.

Revenues of $1.59 billion surpassed the Zacks Consensus Estimate by 3.9%. Further, the figure was up 26% on a reported basis and 21% on a core basis from the year-ago quarter. In addition, the figure increased 4.6% from the previous quarter.

The year-over-year revenue improvement was driven by strong growth across all regions, business groups and end-markets served. 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 20% and 28% 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 $680 million or 43% of its total revenues, up 22% year over year. This was driven by a positive environment across all end markets served, especially the pharma market. Also, strength in Cell Analysis, Liquid Chromatography and Mass Spectrometry platforms aided the results.

ACG: Revenues from the segment were $560 million, accounting for 35% of total revenues. Also, the top line improved 21% year over year, driven by increasing activity in customer labs and instrument connect rates.

DGG: Revenues increased 44% year over year to $346 million, accounting for the remaining 22% of total revenues. The top line was driven by strong growth across product lines and all regions served. Also, solid NASD GMP oligo business drove the results.

Operating Results

For the fiscal third quarter, gross margin in the LSAG segment expanded 70 basis points (bps) on a year-over-year basis to 60%.

DGG gross margin expanded 370 bps on a year-over-year basis to 53.5%. Yet, ACG gross margin contracted 10 bps to 52.5%.

The increase in margins was driven by strong top-line growth and positive mix.

Research & development costs were $113 million, up 22.8% year over year. Selling, general & administrative expenses were $403 million, which increased 16.1% year over year.

Operating margin for the fiscal third quarter was 26%, which expanded 230 bps on a year-over-year basis.

Segment-wise, operating margin for LSAG expanded 240 bps year over year to 25%. The DGG segment’s operating margin expanded 540 bps on a year-over-year basis to 22.6%. ACG operating margin was 29.3%, which expanded 90 bps from the year-ago quarter.

Balance Sheet

As of Jul 31, 2021, Agilent’s cash and cash equivalents were $1.43 billion, up from $1.38 billion on Apr 30, 2021.

Accounts receivables were $1.12 billion at fiscal third quarter-end, up from $1.08 billion at fiscal second quarter-end.

Further, total debt (short + long term) was $2.86 billion for the reported quarter compared with $2.93 billion in the prior quarter.

Outlook

For the fiscal fourth quarter, the company expects revenues of $1.63-$1.66 billion.

Non-GAAP earnings per share are expected to be $1.15-1.18 per share.

For fiscal 2021, Agilent raised its revenue guidance from $6.15-$6.21 billion to $6.29-$6.32 billion. The company expects strong momentum across the business to continue.

Also, management upwardly revised its non-GAAP earnings guidance from $4.09-$4.14 per share to $4.28-$4.31.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted 6.82% due to these changes.

VGM Scores

Currently, Agilent has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. 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 trending upward for the stock, and the magnitude of these revisions looks promising. 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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