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Agilent (A) Down 2.6% Since Earnings Report: Can It Rebound?

It has been about a month since the last earnings report for Agilent Technologies, Inc. A. Shares have lost about 2.6% in that time frame.

Will the recent negative trend continue leading up to its next earnings release, or is A due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Recent Earnings

Agilent delivered first-quarter fiscal 2018 non-GAAP earnings of 66 cents per share, which beat the Zacks Consensus Estimate by 8 cents. The figure also increased 24.5% from the year-ago quarter.

Revenues of $1.21 billion increased 13.2% year over year driven by strong growth across all regions, particularly Europe and Asia-Pacific. Europe (31.6% of revenues) increased 18.7% to $381 million, while Asia-Pacific (36.2% of revenues) grew 13.5% to $437 million. Americas increased almost 9% year over year to $393 million.

Segment Details

Life Sciences & Applied Markets Group (“LSAG”) revenues accounted for $616 million or 51.1% of total revenues, reflecting an increase of 14.3% year over year. This was driven by double-digit gains in major platforms led by Mass Spec and Cell analysis. Robust demand in Europe and China as well as strong end-markets drove top-line growth.

During the quarter, Agilent acquired Luxcel Biosciences, a developer of real-time fluorescence plate-readers based in-vitro cell assay kits.

Diagnostics and Genomics Group (“DGG”) came in at $408 million or 33.8% of total revenues. The segment revenues were up 12.4% year over year, driven by strong demand for pathology products and companion diagnostics services.

During the quarter, Agilent launched CRISPR Activation and Interference (a/i) libraries and GenetiSure Dx Postnatal Assay.

Revenues from Agilent Cross Lab Group (“ACG”) came in at $182 million or 15.1% of total revenues, reflecting an increase of 11.7% year over year. Both services and consumables witnessed growth. China and Food led growth across all regions and major end-markets.

During the quarter, Agilent launched the ValueLab line of consumables for China and CrossLab Service Guarantee.

End-Market Revenue Details

Analytical Laboratory contributed 86% of revenues and increased 11% year over year.

Diagnostics & Clinical end-market accounted for the remaining 14% of revenues and increased 5% driven by robust performance from pathology and companion diagnostics, particularly in the Americas and Japan.

Analytical Laboratory comprises Pharma & Biotech, Academia & Govt., Environmental & Forensics, Food and Chemical & Energy end-markets.

Pharma & Biotech accounted for 29% of total revenues and increased 8% year over year on the back of balanced growth across instruments, services and consumables in both Small molecule and Bio-pharma.

Academia & Govt. accounted for 9% of total revenues and increased 11% year over year owing to strong demand in Europe and China.

Environmental & Forensics accounted for 12% of total revenues and increased 14% year over year driven by strength in Forensics and demand for GC, GC/MS, and ICP/MS.

Food contributed 11% of total revenues and increased 8% year over year led by consumables, mass spec and GC with regional strength in Europe.

Chemical & Energy contributed 25% of total revenues and increased 13% year over year led by robust performance across regions, products and sub-segments.

Operating Details

Non-GAAP gross margin expanded 170 basis points (bps) on a year-over-year basis to 56.7%.

Non-GAAP research & development (R&D) expenses as percentage of revenues declined 10 bps to 7.6%. However, non-GAAP selling, general & administrative (SG&A) expenses as percentage of revenues expanded 60 bps to 27.2%.

Non-GAAP operating margin expanded 140 bps on a year-over-year basis to 22.3% in the reported quarter.

Segment wise, LSAG and ACG operating margin expanded 240 bps and 120 bps on a year-over-year basis, respectively. However, DGG operating margin contracted 200 bps from the year-ago quarter.

Guidance

For second-quarter fiscal 2018, Agilent expects revenues between $1.20 billion and $1.22 billion, up 9.5% year over year at mid-point. Non-GAAP earnings are expected in the range of 61-63 cents.

For fiscal 2018, Agilent projects revenues in the range of $4.885-$4.905 billion and non-GAAP earnings in the range of $2.62-$2.68 per share.

At mid-point, adjusted operating margin is projected to be 22.6%.

Agilent anticipates returning dividends worth $190 million during the fiscal year. Currently, the company has a share buyback authorization worth $380 million.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. There has been one revision higher for the current quarter compared to four lower.

VGM Scores

At this time, A has a strong Growth Score of A, a grade with the same score on the momentum front. However, the stock was allocated a grade of F on the value side, putting it in the bottom 20% 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.

Zacks style scores indicate that the company's stock is suitable for growth and momentum investors.

Outlook

Estimates have been broadly trending downward for the stock and the magnitude of these revisions indicates a downward shift. Notably, A has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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