Why Is Agilent Up 1.2% Since Last Earnings Report?

It has been about a month since the last earnings report for Agilent Technologies A. Shares have added about 1.2% in that time frame, underperforming 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 drivers.

Agilent Q3 Earnings Beat Estimates

Agilent Technologies has delivered third-quarter fiscal 2024 earnings of $1.32 per share, which beat the Zacks Consensus Estimate by 5.6%. However, the bottom line decreased 8% from the year-ago quarter.

Revenues of $1.58 billion beat the Zacks Consensus Estimate of $1.56 billion. The top line declined 5.6% on a reported basis and 4.4% on a core basis from the year-ago quarter.

The decline was attributed to broad-based weakness across the Pharma, Food, Chemical and Advanced Materials, and Academic and Government markets.

Weak momentum in China was another concern.

Nevertheless, the company witnessed improvements in the Diagnostics and Clinical, and Environmental and Forensics markets in the reported quarter.

Segmental Top-Line Details

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

LSAG: The segment accounted for $782 million or 50% of the company's total revenues, down 8% on a reported basis and 7% on a core basis from the prior-year quarter. This was due to softness in the instrument business, and weakening momentum across all the geographic regions and end markets, except for Environmental and Forensics. The reported figure missed the Zacks Consensus Estimate of $849 million.

ACG: Revenues from the segment were $411 million, accounting for 26% of the total revenues. The figure surpassed the consensus mark of $385 million. The top line improved 4% from the prior-year quarter on a reported basis and rose 5% on a core basis. This was driven by strong growth in service contract revenues. Growing momentum across all geographic regions, except for China, was a positive.

DGG: Revenues decreased 9% year over year on a reported and 8% on a core basis to $385 million, accounting for the remaining 24% of the total revenues. The figure beat the consensus mark of $332 million. Sluggishness in Genomics, Cell Analysis and NASD was concerning.

Operating Results

For the fiscal third quarter, the gross margin in the LSAG segment expanded by 10 basis points (bps) to 60.2% from the prior-year quarter. ACG's gross margin expanded by 120 bps to 52.1%. DGG's gross margin contracted 170 bps year over year to 51.8%.

Research and development ("R&D") expenses were $127 million, up 7.6% from the prior-year quarter. Selling, general and administrative ("SG&A") expenses were $395 million, down 2.9% from the year-earlier quarter. As a percentage of revenues, R&D expenses expanded by 90 bps year over year to 8%, whereas SG&A expenses increased 70 bps year over year to 25%.

The operating margin for the fiscal third quarter was 21.1%, which expanded significantly from 7.9% in the year-earlier quarter.

Segment-wise, the operating margin in the LSAG segment contracted by 260 bps to 28.4% from the prior-year quarter. ACG's operating margin expanded by 130 bps year over year to 34%. DGG's operating margin contracted 440 bps year over year to 18.3%.

Balance Sheet

As of Jul 31, 2024, Agilent's cash and cash equivalents were $1.78 billion, up from $1.67 billion as of Apr 30, 2024.

Accounts receivables were $1.23 billion at the end of third-quarter fiscal 2024 compared with $1.25 billion at the end of second-quarter fiscal 2024.

The long-term debt was $2.137 billion for the reported quarter compared with $2.136 billion in the prior quarter.

Guidance

For the fourth quarter of fiscal 2024, management expects revenues of $1.641-$1.691 billion, suggesting a decline of 2.8% to an increase of 0.2% on a reported basis and a decrease of 1.9% to a rise of 1.1% on a core basis from the year-ago quarter's actuals.

Non-GAAP fiscal fourth-quarter earnings per share are expected to be $1.38-$1.42.

For fiscal 2024, management revised its revenue guidance from $6.42-$6.50 billion to $6.45-6.50 billion, implying a fall of 5.6-4.9% on a reported basis and 5-4.3% on a core basis from the fiscal 2023 reported figure.

The company also revised fiscal 2024 non-GAAP earnings per share guidance from $5.15-$5.25 to $5.21-5.25.

How Have Estimates Been Moving Since Then?

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

VGM Scores

Currently, Agilent has an average Growth Score of C, a grade with the same score on the momentum front. Charting a somewhat similar path, 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.

To read this article on Zacks.com click here.