Agilent Technologies, Inc. (A)

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Agilent Technologies (A)

Q4 2011 Earnings Call

November 15, 2011 4:30 pm ET

Executives

Alicia Rodriguez -

William P. Sullivan - Chief Executive Officer, President, Executive Director and Member of Executive Committee

Ronald S. Nersesian - Senior Vice President and President of Electronic Measurement Group

Nicolas H. Roelofs - Senior Vice President and President of Life Sciences Group

Didier Hirsch - Chief Financial Officer, Principal Accounting Officer and Senior Vice President

Michael R. McMullen - Senior Vice President and President of Chemical Analysis Group

Analysts

Ross Muken - Deutsche Bank AG, Research Division

S. Brandon Couillard - Jefferies & Company, Inc., Research Division

Paul R. Knight - Credit Agricole Securities (USA) Inc., Research Division

Jonathan P. Groberg - Macquarie Research

Jeff Ares - Goldman Sachs Group Inc., Research Division

Nandita Koshal - Barclays Capital, Research Division

William Stein - Crédit Suisse AG, Research Division

Derik De Bruin - BofA Merrill Lynch, Research Division

Ajit Pai - Stifel, Nicolaus & Co., Inc., Research Division

Doug Schenkel - Cowen and Company, LLC, Research Division

Tycho W Peterson - JP Morgan Chase & Co, Research Division

Richard C. Eastman - Robert W. Baird & Co. Incorporated, Research Division

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the Fourth Quarter 2011 Agilent Technologies Earnings Conference Call. My name is Keith, and I'll be your operator for today. [Operator Instructions] As a reminder, today's conference is being recorded for replay purposes. And I would now like to turn the conference over to your host for today, Ms. Alicia Rodriguez, Vice President of Investor Relations. Please go ahead, ma'am.

Alicia Rodriguez

Thank you, Keith, and welcome, everyone, to Agilent's Fourth Quarter Conference Call for Fiscal Year 2011. With me are Agilent's President and CEO, Bill Sullivan; as well as Senior Vice President and CFO, Didier Hirsch. Bill will give his perspective on the quarter and Didier will follow with a view of financial results. After Didier's comments, we will open the line for questions. Joining in our Q&A will be the presidents of Agilent's Electronic Measurement, Life Sciences and Chemical Analysis Groups, Ron Nersesian; Nick Roelofs; and Mike McMullen.

In case you've not had a chance to review our press release, you can find it on our website at www.investor.agilent.com. We are also providing further information to supplement today's discussion. At our website, please click on the link for supporting materials. There, you will find information such as revenue breakouts, historical financials for Agilent's operations and an investor presentation. We will also post a copy of the prepared remarks following this call.

If during this conference call we use any non-GAAP financial measures, you will find on our website the most directly comparable GAAP financial metrics and a reconciliation between the 2. We will make forward-looking statements about the future financial performance of the company. These statements are subject to risks and uncertainties and are only valid as of today. The company assumes no obligation to update them. Please look at the company's recent SEC filings for a more complete picture of our risks and other factors.

And now I'd like to turn the call over to Bill.

William P. Sullivan

Thanks, Alicia, and hello, everyone. Agilent had Q4 orders of $1.75 billion, up 4% year-over-year. Q4 revenues of $1.73 billion were up 9% year-over-year. The revenues were slightly below our guidance due to currency.

Non-GAAP EPS was $0.84 per share, above our guidance, and operating margin was 21.6%. Agilent's operational performance was the best in its history.

Electronic Measurement had Q4 revenues of $855 million, up 12% over last year. Communications growth of 20% was driven by wireless manufacturing. General purpose growth of 8% was driven by industrial markets, while Aerospace and Defense grew 2%. Quarterly operating margin was above 24%, another record high for the business.

Chemical Analysis saw revenue growth of 4% over last year to $405 million. Petrochemical grew 8%, with strong GC sales to industrial accounts. Food was up 5%, driven primarily by China. Forensics and environmental revenues were up 1%. Q4 operating margin was 24%. Life Science revenues of $471 million were up 9% over last year. Strong demand from applied markets led the growth. Pharma grew 5%, academic government was up 4% and operating margin for the quarter was 14%. In summary, our applied markets grew 9%, our core Life Science business grew 4%.

We generated $510 million of cash from operations and ended the fiscal year with $1.4 billion in net cash. For the year, Agilent's revenue of $6.6 billion were up 21% over last year. Operating profit of $1.3 billion, 20% of revenue, was up 40%. FY '11 was an excellent year for Agilent.

Our outlook for FY '12 is for the revenue to be $6.85 billion to $7.15 billion. FY '12 EPS is expected to be in the range of $3 to $3.35 per share. The basis for our forecast is as follows. Today, the outlook for the worldwide gross domestic product growth is about 3.5%. We are going to take a conservative position in the measurement market and assume that, that market will also grow 3.5%. Based on our geographic and product mix of our 8 market segments, we will believe we'll have an additional 1.5% growth. And finally, the Electronic Measurement Group's backlog flush will contribute 0.7%. Therefore, we'll end up in the midrange of our guidance of roughly 5.7% growth for next year.

By market segment, Electronic Measurement is expected to grow 4.2% inclusive of the anticipated reduction of backlog. Life Science and Chemical Analysis combined are expected to grow 7.1%, again resulting in our midrange growth guidance of 5.7%.

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