A month has gone by since the las t earnings report for Agilent Technologies (A). Shares have added about 3.9% in that time frame, outperforming 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 the most recen t earnings report in order to get a better handle on the important drivers.
Agilent Misses Earnings and Revenue Estimates in Q2
Agilent Technologies' fiscal second-quarter 2019earnings of 71 cents per share missed the Zacks Consensus Estimate by a penny. The bottom line decreased 6.6% sequentially but increased 9.2% year over year.
Fiscal second-quarter 2019 revenues of $1.24billion increased 2.7% year over year. The reported revenues, which came in below management's guided range of $1.255-$1.270 billion, missed the Zacks Consensus Estimate of $1.27 billion.
The year-over-year revenue growth was supported by notable improvement across its ACG and DGG segments.
Revenues by Segment
Agilent has three reporting segments - Life Sciences & Applied Markets Group (LSAG), Agilent Cross Lab Group (ACG), and Diagnostics and Genomics Group (DGG).
In the reported quarter, LSAG was the largest contributor to total revenues. The segment accounted for $529 million or 43% of its total revenues, reflecting a decrease of 1% from the prior-year quarter. The demand in environmental and forensics markets was strong, offset by weakness in pharma and food markets. Slowing of internal orders in China affected this segment.
Revenues from ACG came in at $455 million, accounting for 37% of the total revenues, reflecting a 7% year-over-year increase. Both services and consumables recorded growth across all geographical regions, led by China.
Revenues from DGG came in at $254 million, accounting for the remaining 20% of the total revenues. The segment's revenues were up 5% from the year-ago quarter, led by strength in the company's pathology-related businesses and Nucleic Acid Solutions Division (NASD).
Gross margin in the quarter was 56%, up 70 basis points (bps) year over year. The increase was due to a favorable product mix.
Operating expenses (research & development as well as selling, general & administrative) were $453 million, 4.6% higher than the year-ago quarter.
As a result, adjusted operating margin was 17.4%, flat with the year-ago quarter.
At the end of the fiscal second quarter, inventories totaled $657 million, reflecting an increase from $653million in the comparable prior-year period. Agilent's long-term debt was $1.8 billion at the end of the quarter. Cash and cash equivalents were $2.2 billion compared with $2.1 billion in fiscal first-quarter 2019.
Agilent provided guidance for the fiscal third quarter and revised the same for fiscal 2019.
For the fiscal third quarter, the company expects revenues between $1.225 billion and $1.245 billion, and earnings per share in the range of 71-73 cents.
For fiscal 2019, Agilent has lowered revenue projection in the range of $5.085-$5.125 billion versus previous expectation of $5.15-$5.19 billion. However, the company maintained its non-GAAP earnings guided range of $3.03-$3.07 per share.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
At this time, Agilent has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
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.
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