Agilent Technologies ' A fiscal fourth-quarter 2015 earnings per share of 50 cents beat the Zacks Consensus Estimate by 3 cents and came above management's guidance range. Earnings increased 14.6% sequentially and 4.7% year over year.
Agilent Technologies Inc. - Earnings Surprise | FindTheCompany
Revenues
Agilent's fourth-quarter revenues of $1.04 billion were up 2.1% from the last quarter but down 0.8% year over year. Revenues were within management's guidance range of $1.03 billion to $1.05 billion and in line with the Zacks Consensus Estimate.
Revenue growth was supported by continued strength in the pharma, diagnostics, clinical and food markets and across all geographies. Product lines of strength included its CrossLab services and consumables, diagnostics and genomics as well as liquid chromatography offerings.
Revenues by Geography
Americas was a significant revenue contributor with 37% share, while Asia/Pacific and Europe accounted for 33% and 30%, respectively. Only the Americas grew sequentially.
Revenues by Segment
Agilent now has three reporting segments - Life Sciences & Applied Markets Group (LSAG), Agilent Cross Lab Group (ACG) and Diagnostics and Genomics Group (DGG). Its Electronic Measurement Group (EMG) segment has been spun off into Keysight Technologies, an independent, publicly traded company. Agilent also exited the Nuclear Magnetic Resonance business which failed to meet its growth and profitability goals. The company divested or shut down underperforming units to streamline operations.
LSAG was the largest contributor in the last quarter and accounted for $515 million or 50% of total revenue, down 4% year over year. Strong performance in Pharma was offset by softness in the industrial and academia & government markets.
ACG contributed $342 million or 33% to revenues, up 3% year over year. Both services and consumables experienced growth across all geographies.
DGG garnered $178 million or 17% of revenues. The segment was up 4% year over year. All businesses under this group (Dako, Genomics and Nucleic Acid Solutions) did well.
Margins
The pro-forma gross margin for the quarter was 51.7%, down 176 basis points (bps) sequentially but up 577 bps from last year.
Adjusted operating expenses dropped 9% sequentially but were up 60% from the year-ago quarter. As a result, the operating margin of 21.5% increased 192 bps sequentially but declined 568 bps year over year.
Operating margins of LSAG, AGG and DGG segments were 20.0%, 25.1% and 19.2%, respectively.
Net Income
Agilent generated pro-forma net income of $168 million, or 16.2% of sales, compared with $161 million, or 15.4%, a year ago. Our pro-forma estimate excludes acquisition-related costs, restructuring charges, amortization of intangibles and other one-time items, as well as tax adjustments.
Including these items, GAAP net income was $140 million (42 cents per share) compared with $23 million (7 cents a share) last year.
Balance Sheet
Inventories were down 0.7% sequentially to $541 million. Agilent's long-term debt was $1.65 billion at the end of the quarter.
In 2015, Agilent returned $400 million to shareholders through dividends and buybacks while generating $491 million in operating cash flow. The company did not repurchase any stock in the fourth quarter.
Guidance
Agilent issued guidance for the first quarter of 2016 and fiscal 2016.
For the first quarter, Agilent expects revenues within $1.00 billion to $1.02 billion and non-GAAP earnings per share in the range of 42 cents to 44 cents. Analysts polled by Zacks expect earnings of 47 cents, and revenues of $1.05 billion.
For fiscal 2016, Agilent projects revenues between $4.15 billion and $4.17 billion and non-GAAP earnings per share in the $1.85 to $1.91 range. Analysts polled by Zacks expect earnings of $1.70, and revenues to the tune of $4.21 billion.
Recommendation
Agilent delivered decent fiscal fourth-quarter 2015 results with the bottom line surpassing the Zacks Consensus Estimate and the top line matching the same.
The company's decision to divest/ wind up underperforming businesses has enhanced focus on the new Agilent, while enabling management to expand the solid recurring revenue base and diversify geographic and industrial operations to achieve growth. Also, the company's focus on aligning investment toward more attractive growth avenues and innovative product launches is a positive.
In addition, we remain positive on Agilent's broader portfolio and increased focus on segments with higher growth potential. Further, the company continues to introduce high-margin products.
Moreover, the company recently launched the multi-year "Agile Agilent" Program to increase efficiency and customer focus.
Foreign currency headwinds may have a negative impact on revenues and profits, but the company seems prepared to counter it.
Agilent carries a Zacks Rank #3 (Hold). Investors can also consider Stamps.com Inc. STMP , Travelport Worldwide Limited TVPT and Amazon.com Inc. AMZN . While Stamps.com and Travelport sport a Zacks Rank #1 (Strong Buy), Amazon carries Zacks Rank# 2 (Buy).
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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.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
