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Why Is Agilent (A) Down 5.8% Since Last Earnings Report?

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It has been about a month since the last earnings report for Agilent Technologies (A - Free Report) . Shares have lost about 5.8% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Agilent due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Agilent's Q1 Earnings Beat Estimates, Revenues Up Y/Y

Agilent Technologies reported first-quarter fiscal 2021 earnings of $1.06 per share, beating the Zacks Consensus Estimate by 17 cents. Further, the bottom line improved 30.9% year over year and 8.2% sequentially.

Revenues of $1.55 billion were up 14% on a reported basis and 11% on a core basis.

Also, the top line surpassed the Zacks Consensus Estimate of $1.43 billion.

This was driven by strong growth across all regions served and the three businesses.

We note that region wise, Americas, Asia-Pacific and Europe accounted for 36%, 36%, and 28% of revenues, respectively, for the reported quarter.

By type, 56% of revenues were generated from Consumer Services Informatics. Instruments accounted for the remaining 44% of revenues.

In terms of major markets, Analytical Laboratory generated 86% of fiscal first-quarter revenues. Dx & Clinical accounted for the remaining 14%.

Segment Top-Line Details

Agilent has three reporting segments — Life Sciences & Applied Markets Group (LSAG), Agilent Cross Lab Group (ACG), and Diagnostics and Genomics Group (DGG).

For the reported quarter, LSAG was the largest contributor to total revenues. The segment accounted for $722 million or 47% of its total revenues, up 13% year over year. This was driven by improving conditions across geographies, led by growth in Food and Pharma. Also, strength in Cell Analysis, Liquid Chromatography and Mass Spectrometry platforms aided the results.

Revenues from ACG were $532 million, accounting for 34% of total revenues. Also, the top line improved 13% year over year, driven by improving lab operating environment. Also, growth was broad across major markets and regions served.

DGG revenues increased 18% year over year to $294 million, accounting for the remaining 19% of total revenues. The segment was driven by strong Pharma market, including continued strong NASD ramp.

Operating Results

For the fiscal first quarter, LSAG gross margin expanded 30 basis points (bps) on a year-over-year basis to 60.5% due to higher volumes.

DGG gross margin contracted 10 bps on a year-over-year basis to 51.6%. Also, ACG gross margin contracted 10 bps to 51.7%.

Research & development costs were $103 million, down up 0.96% year over year, while selling, general & administrative expenses were $407 million, up 0.74% year over year.

Operating margin for the fiscal first quarter was 21.2%, up 540 bps on a year-over-year basis.

Segment wise, operating margin for the LSAG segment expanded 280 bps year over year to 27.6%. DGG segment operating margin expanded 510 bps on a year-over-year basis to 18.6%. ACG operating margin was 26.7%, which expanded 130 bps from the year-ago quarter.

Balance Sheet

As of Jan 31, 2021, Agilent’s cash and cash equivalents were $1.33 billion, down from $1.44 billion in the prior quarter.

Accounts receivables were $1.09 billion at fiscal first quarter-end, up from $1.04 billion at fiscal fourth quarter-end.

Further, total debt (short + long term) was $2.5 billion for the reported quarter compared with $2.4 billion in the prior quarter.

Outlook

Agilent provided its guidance for the fiscal second quarter and 2021.

For the fiscal second quarter, the company expects revenues in the range of $1.37-$1.39 billion, indicating core growth of 7-9% year over year. Earnings per share are expected in the range of 78-80 cents.

For fiscal 2021, Agilent increased its revenue guidance to $5.825-$5.900 billion versus previous expectation of $5.6-$5.7 billion. The guidance indicates core growth of 6.5-8% from a year ago.

Non-GAAP earnings are now projected in the range of $3.80-$3.90 per share versus its previous guided range of $3.57-$3.67.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month.

VGM Scores

At this time, Agilent has a subpar Growth Score of D, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of F on the value side, putting it in the fifth quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

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 #2 (Buy). We expect an above average return from the stock in the next few months.


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