Investors in Agilent Technologies, Inc. (NYSE:A) had a good week, as its shares rose 3.6% to close at US$81.08 following the release of its annual results. It looks like the results were a bit of a negative overall. While revenues of US$5.2b were in line with analyst predictions, earnings were less than expected, missing estimates by 3.6% to hit US$3.37 per share. Following the result, analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. With this in mind, we've gathered the latest forecasts to see what analysts are expecting for next year.
Following the latest results, Agilent Technologies's 13 analysts are now forecasting revenues of US$5.54b in 2020. This would be a reasonable 7.4% improvement in sales compared to the last 12 months. Earnings per share are forecast to descend 16% to US$2.87 in the same period. In the lead-up to this report, analysts had been modelling revenues of US$5.55b and earnings per share (EPS) of US$3.05 in 2020. Analysts seem to have become a little more negative on the business after the latest results, given the minor downgrade to their earnings per share forecasts for next year.
It might be a surprise to learn that the consensus price target was broadly unchanged at US$84.25, with analysts clearly implying that the forecast decline in earnings is not expected to have much of an impact on valuation. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. Currently, the most bullish analyst values Agilent Technologies at US$93.00 per share, while the most bearish prices it at US$66.00. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await Agilent Technologies shareholders.
It can be useful to take a broader overview by seeing how analyst forecasts compare, both to the Agilent Technologies's past performance and to peers in the same market. It's clear from the latest estimates that Agilent Technologies's rate of growth is expected to accelerate meaningfully, with forecast 7.4% revenue growth noticeably faster than its historical growth of 5.7%p.a. over the past five years. Compare this with other companies in the same market, which are forecast to grow their revenue 7.6% next year. Agilent Technologies is expected to grow at about the same rate as its market, so it's not clear that we can draw any conclusions from its growth relative to competitors.
The Bottom Line
The most important thing to take away is that analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. Happily, there were no real changes to sales forecasts, with the business still expected to grow in line with the overall market. The consensus price target held steady at US$84.25, with the latest estimates not enough to have an impact on analysts' estimated valuations.
With that in mind, we wouldn't be too quick to come to a conclusion on Agilent Technologies. Long-term earnings power is much more important than next year's profits. We have forecasts for Agilent Technologies going out to 2024, and you can see them free on our platform here.
You can also view our analysis of Agilent Technologies's balance sheet, and whether we think Agilent Technologies is carrying too much debt, for free on our platform here.
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