Agilent Technologies, Inc (A): New Analyst Report from Zacks Equity Research - Zacks Equity Research Report


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Agilent Technologies is a broad-based OEM of test and measurement equipment. The company's third quarter earnings were above the Zacks Consensus Estimate. Agilent's focus has shifted to life sciences, genomics, diagnostics and wireless test markets, where the company has made a few important acquisitions. The Electronic Measurement spin-off should reduce the cyclicality of the business. However, the macro weakness in the U.S. and Europe may temper revenue growth with the significant increase in operating expenses impacting the bottom line. We therefore have a Neutral recommendation on Agilent shares.


Palo Alto, CA-based Agilent Technologies, Inc. (A) was originally a spin-off from Hewlett-Packard. The company is an original equipment manufacturer (OEM) of a broad-based portfolio of test and measurement products serving multiple end markets.

In fiscal year 2008, the company had two operating segments Electronic Measurement (EM) and Bio-Analytical Measurement (BAM). In 2009, the company restructured the business and reported results in three segments EM, BAM and Semiconductor Board & Test (SBT). In 2010, the reporting structure was changed again, splitting BAM into the Chemical Analysis and Life Sciences segments, while the rest of the business was reported under EM. Following the Dako acquisition, which was completed in the third quarter of fiscal 2012, Agilent created a fourth reporting segment, which it is calling Diagnostics and Genomics. In 2013, the structure was again changed, with Diagnostics being merged with Life Sciences to create the Life Sciences & Diagnostics Segment. Therefore, segment contribution in 2013 was as follows- EMG 43% (down 12.9%), LDG 34% (up 15.9% from 2012) and CAG 24% (up 2.2%).

The EM segment (to be spun off as a wholly owned subsidiary of Agilent to operate as Keysight Technologies from Aug 1, 2014) can be further split into the general purpose test and communications test businesses. General purpose test products, including general purpose instruments, modular instruments and test software, digital test products, semiconductor and board test solutions, electronics manufacturing test equipment, atomic force microscopes and radio frequency and network surveillance solutions are primarily targeted at electronics, aerospace & defense and computing markets. Communications test products and services are used in wireless communications and microwave networks, as well as voice, broadband, data and fiber optic networks.

The Life Sciences and Diagnostics product line includes liquid chromatography, mass spectrometry, micro-array, polymerase chain reaction (PCR) instrumentation, bio-reagents, lab software, informatics automations and robotics, electrophoresis, and software and informatics products. With the addition of Varian, the segment now also caters to the magnetic resonance imaging (MRI) and nuclear magnetic resonance (NMR) systems and X-ray diffractometers and related consumables and services. The diagnostics side includes products and techniques like IHC, ISH, H&E and other special staining, gene diagnostics among others. It also collaborates with pharma companies to develop companion diagnostics information. The products are targeted at both for-profit organizations, such as pharmaceutical and biotechnology companies, contract research organizations and manufacturing organizations and not-for-profit organizations, such as academic institutions, large government institutes and privately funded organizations.

Chemical Analysis products include the company's gas chromatography, mass spectrometry, spectroscopy, vacuum technology products, as well as various consumables and supplies.

The company uses a direct sales model for the distribution of its products, which is supplemented by distributors, resellers, manufacturer's representatives, telesales and electronic commerce, as necessary.

Important competitors in the EM segment include Aeroflex, Applied Wave Research, EXFO, JDS Uniphase, Rohde & Schwartz, Tektronix, Fluke Corp, Keithley Instruments, LeCroy Corporation, National Instruments Corporation, Photon Dynamics, Teradyne and Wintest Corp.

Most of the competition for LifeSciences & Diagnotics and Chemical Analysis segments comes from Bruker Corp., Danaher Corp, Affymetrix, GE Healthcare, Life Technologies Corp., Thermo Fisher Scientific, Waters Corp., Illumina, Inc., Life Technologies Corp., Abbott Laboratories, Sakura, Roche, Perkin Elmer Corp., Shimadzu Corp, Heidenhain Corp., Malvern Instruments, Seiko Instruments, Veeco Instruments and Zygo Corp.

The geographical distribution of revenue in fiscal 2013 was as follows. The Asia/Pacific region was the largest geography contributing 38% of revenue, followed by the Americas at 38% and Europe at 26%.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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