Agilent Ups Buyback, Hikes Dividend

Agilent Technologies Inc. (A - Analyst Report), a broad-based OEM of test and measurement equipment has authorized the repurchase of shares up to $500 million of the company’s common stock during fiscal 2013.

Additionally, the company also announced its decision to raise the quarterly dividend by two cents to 12 cents per share. This translates into a 20% increase from the prior dividend. The increased dividend will be paid on April 24, 2013, to stockholders of record on April 24, 2013. Prior to this announcement, Agilent had been paying a quarterly dividend of 10 cents per share.

The strength of Agilent’s business model reflects the company’s commitment toward returning value to shareholders with its strong cash generation capabilities. We believe that the continued share buybacks and dividend hike will increase investor enthusiasm for the shares.

Agilent’s strong balance sheet and cash flows provide financial flexibility in matters of incremental dividend, share repurchases and accretive acquisitions. During the last concluded quarter, Agilent spent $94 million on share repurchases and $34 million on dividends. The cash and cash equivalents were $2.4 billion at quarter-end, having increased $0.5 billion during the quarter. The debt cap ratio was just 28.9%. We remain encouraged by Agilent’s strong cash position and its ability to service its long-term debts.

Agilent reported decent fourth quarter results, with both revenue and earnings per share surpassing our expectations. Agilent’s leadership position, history of innovation, strengthening end markets, stable gross margins, steadily improving operating margins, and position in China are all positives. The increase in dividend indicates that the company is confident about its steady cash flows.

However, an uncertain macro conditions, particularly in the U.S. and Europe and a softer-than-expected earnings guidance increased concerns regarding near-term performance. Hence, Agilent has a Zacks Rank #5 (Strong Sell).

However, all companies with testing portfolios are not doing as bad however. You may consider companies like Teradyne (TER - Analyst Report) and Thermo Fisher Scientific, Inc. (TMO - Analyst Report) which carry a Zacks Rank #2 (Buy) and Danaher Corp. (DHR - Analyst Report) which carries a Zacks Rank #3 (Hold).