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Agilent Prices Public Offering of $500M Senior Notes Due 2029

Zacks Equity Research

Agilent Technologies A recently announced an underwritten public offering of senior notes aggregating $500 million. The notes carry an interest rate of 2.750% and are scheduled to mature on Sep16, 2029.

Barclays Capital Inc., J.P. Morgan Securities LLC and MUFG Securities Americas Inc. are acting as joint book-running managers for this purpose. In this regard, the company has filed for automatic registration under the Securities and Exchange Commission.

Agilent stated that the transaction proceeds from the offering are expected to be approximately $492.8 million. The net proceeds from the planned offering and available cash will be used to fund the redemption of its senior notes due 2020.These notes carry an interest rate of 5.00%.

Cash Position

At the end of fiscal third-quarter 2019, Agilent’s cash and short-term investments totaled $1.8 billion compared with $2.2 billion at the end of the prior quarter. Long-term debt was approximately $1.3 billion.

On a year-to-date basis, the company has deployed more than $2.2 billion capital. Out of this amount, $1.4 billion was spent on growth acquisitions. It returned more than $800 million through dividends and share buybacks.

We believe that the company has a strong balance sheet, which will help it to capitalize on investment opportunities and pursue strategic acquisitions, further improving prospects.

In our view, the public stock offering is expected to boost financial flexibility and help the company meet financial obligations in an efficient way. Moreover, it provides ample scope to deploy capital for long-term growth opportunities and rewarding higher returns to stockholders, at the same time.

Bottom Line

Agilent’s expanding product portfolio, end-market strength, and robust performance in Americas, China and Europe are key growth drivers. Moreover, the company’s decision to divest/wind up underperforming businesses is beneficial for core operations. Further, its focus on aligning investments toward more attractive growth avenues and innovative high-margin product launches is a positive.

Notably, the company has strengthened its position in the global pharma market. Recently, Agilent entered into a definitive agreement to acquire Winooski, VT-based BioTek Instruments, Inc., a provider of life science instrumentation, in a bid to expand presence in the life science research space. The deal will likely strengthen Agilent’s offerings related to live cell analysis, as these product lines aid in quantification of biomolecules, biomolecular interactions and cellular structure.

However, increasing competition and higher expenses are making margin expansion difficult for the company.

Zacks Rank and Other Stocks to Consider

Agilent currently carries a Zacks Rank #2 (Buy). Other top-ranked stocks in the broader technology sector include Alphabet Inc. GOOGL, Itron, Inc. ITRI and MACOM Technology Solutions Holdings, Inc. MTSI, each carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Long-term earnings growth for Alphabet, Itron and MACOM Technology is currently projected at 17.5%, 25% and 15%, respectively.

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