How Agile is Agilent Technologies?

Garima is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

Agilent Technologies (NYSE: A), a leading service provider of bio-analytical and electronic measurement solutions recently released its fourth quarter earnings. The company has shown an increase of 50 basis points (bps) in its gross margin from the year ago-quarter due to efficient cost management, but company's pessimism about its future earnings in its conference call is a source of worry. I beleive operating in a cyclical industry with its broad industry exposure will enable the company to rebound strongly. Lets delve deeper into the company.

Measurable Aspects

Although orders were flat year-over-year, Q4 revenues were up by 2% over the last year. Its operating margin was almost 22%, and non-GAAP EPS was $0.86 per share. In regards to end markets, Q4 played out as predicted. Fourth quarter revenue, excluding Dako, was flat compared to Q3. Electronic Measurement revenues declined 5% over last year. Aerospace and defense spending was down 2% year-over-year. All of the Chemical Analysis markets remained soft except for Forensic and testing for drugs of abuse, with overall business revenues down 3% year-over-year.

The Life Science business was flat compared to previous year however, the management continues to see positive growth for Pharma and continued weakness in academics and research.

Overall organic growth in the new Diagnostics and Genomics business was slightly up year-over-year. Moreover the recently acquired Dako met its fourth quarter revenue plan and continues to deliver on the management’s expectations.

Looking Forward

Looking ahead for the full fiscal year 2013, Agilent expects revenue of $7 billion to $7.2 billion. The Company has recently opened a new X-ray diffraction manufacturing facility in Wroclaw, Poland. The state-of-the-art facility gives Agilent significantly greater manufacturing capacity and enhanced R&D capabilities compared with the company's old facility. The new site has been designed specifically for the production of the company’s expanding range of products for single-crystal X-ray diffraction, including the recently launched GV1000 X-ray Diffractometer.

Areas to be Considered

However the Electronic measurement Segment faces severe competition from Danaher Corporation (NYSE: DHR) and Teradyne (NYSE: TER). Where DHR designs, manufactures, and markets professional, medical, industrial and commercial products and services primarily in North America and has shown a profit margin of 12.96% for its most recent quarter ending on Sept. 28. Teradyne together with its subsidiaries, provides automatic test equipment products and services worldwide and operates in three segments: Semiconductor Test, Systems Test Group and Wireless Test. It has also showed a profit margin of 21.5% for the most recent quarter ending on Sept. 30.

Moreover Thermo Fisher Scientific (NYSE: TMO) poses as a competitor for the Diagnostics and Genomics Segment of the Company revealing a profit margin of 8.72% for the most recent quarter. On the other hand Agilent Technologies has displayed an overall combined profit margin of 16.81% for all its segments for the most recent quarter ending on October 31, 2012.

Takeaway Advice

Firstly, Agilent constantly offers something for its income-seeking investors. It has paid out cash in the form of both share repurchases and dividends over the past three years.

On the other hand, the broadening portfolio and diversification into new segments with higher growth potential gives a positive outlook about the company.  Further, it is continuing the introduction of new products (with higher margins), which along with those acquired from Varian and more recently Dako should be capable of generating higher growth.

New acquisitions in sectors like life sciences, genomics, diagnostics and wireless test markets, are strengthening the already strong position of the company in the market even more. However, on the contrary, the U.S. economy is apprehensive about the impending Fiscal Cliff and may reduce its expenditure on defense contracts thus increasing the probability of negatively impacting Agilent, as it remains one of the largest providers of spectrum analyzers, network analyzers, signal sources and oscilloscopes to the defense services.

 Therefore a short-term holding on Agilent’s shares is what might just be a good investment option.


garimaarora has no positions in the stocks mentioned above. The Motley Fool has no positions in the stocks mentioned above. Motley Fool newsletter services recommend Thermo Fisher Scientific. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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