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Why Is Agilent (A) Up 5.4% Since Last Earnings Report?

Zacks Equity Research

A month has gone by since the last earnings report for Agilent Technologies (A). Shares have added about 5.4% 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 Earnings and Revenues Surpass Estimates in Q4

Agilent Technologies’ fiscal fourth-quarter 2019 earnings of 89 cents per share surpassed the Zacks Consensus Estimate by 3 cents. In addition, the bottom line increased 17.1% sequentially and 9.9% year over year.

Fiscal fourth-quarter 2019 revenues of $1.37 billion increased 6% year over year (up 4% on a core basis). Also, the reported revenues — which came in above management’s guided range of $1.31-$1.33 — surpassed the Zacks Consensus Estimate of $1.33 billion.

The year-over-year revenue growth was driven by strength in pharma, diagnostics, environmental and forensics markets.

During the quarter, Agilent closed the acquisition of BioTek Instruments, Inc., a provider of life science instrumentation. This deal will expand the company’s presence in the life science research space. It will also strengthen Agilent’s offerings related to live cell analysis as these product lines aid in quantification of biomolecules, biomolecular interactions and cellular structure.

Revenues by Segment

Agilent has three reporting segments — Life Sciences & Applied Markets Group (LSAG), Agilent Cross Lab Group (ACG), and Diagnostics and Genomics Group (DGG).

In the reported quarter, LSAG was the largest contributor to total revenues. The segment accounted for $622 million or 46% of its total revenues, reflecting a 4% increase from the prior-year quarter. The demand in pharma, environmental and forensics markets was strong, offset by weakness in the food market.

Revenues from ACG came in at $476 million, accounting for 34% of total revenues. The reported figure reflects a 8% year-over-year increase, driven by growth across all regions and market segments.

Revenues from DGG came in at $269 million, accounting for the remaining 20% of total revenues. The segment’s revenues were up 5% from the year-ago quarter.

Operating Results

Gross margin in the quarter was 53.9%, down 80 basis points (bps) year over year. The decrease was due to an unfavorable product mix.

Operating expenses (research & development as well as selling, general & administrative) were $487 million, 5% higher than the year-ago quarter.

As a result, adjusted operating margin was 18.3%, down 60 bps from the year-ago quarter.

Balance Sheet

At the end of the fiscal fourth quarter, inventories totaled $679 million, up from $660 million in the prior quarter. Agilent’s long-term debt was $1.79 billion at the end of the quarter. Cash and cash equivalents were $1.38 billion compared with $1.8 billion in fiscal third-quarter 2019.

Guidance

Agilent provided guidance for the fiscal first quarter and 2020.

For the fiscal first quarter, the company expects revenues between $1.340 billion and $1.355 billion, and earnings per share in the range of 80-81 cents. 

For fiscal 2020, Agilent expects revenues in the range of $5.50-$5.55 billion, indicating core growth of 4-5%. Non-GAAP earnings are projected in the range of $3.38-$3.43 per share.

How Have Estimates Been Moving Since Then?

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

VGM Scores

Currently, Agilent has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. Following the exact same course, 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 D. 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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