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Agilent Technologies (A)

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Agilent Technologies (A) is a broad-based OEM of test and measurement equipment. The company's January quarter earnings beat the Zacks Consensus Estimate, helped by revenue growth, operating margin expansion and a lower tax rate.

Agilent's leadership position, history of innovation, stable gross margins and steadily improving operating margins, turnaround in the EM segment, acquisition strategy and position in China are the chief elements of our positive thesis. In contrast, the stabilization in the EM segment, impact of Varian and high debt position are not that much of a concern.

We believe Agilent shares are undervalued at these levels. We are therefore reiterating our Outperform recommendation and raising the price target to $54.00 (20.5X 2011 EPS).

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