A month has gone by since the last earnings report for Agilent Technologies (A Quick QuoteA - Free Report) . Shares have lost about 6.5% 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 catalysts.

Agilent Q3 Earnings Beat Estimates

Agilent Technologies delivered third-quarter fiscal 2023 earnings of $1.43 per share, which beat the Zacks Consensus Estimate by 4.4%. The bottom line increased by 7% from the year-ago fiscal quarter’s level.

Revenues of $1.67 billion surpassed the Zacks Consensus Estimate of $1.66 billion. However, the top line was down 2.7% on a reported basis and 2.3% on a core basis from the respective year-ago fiscal quarter’s levels.

The decline was attributed to sluggishness in Chemistry & Advanced Materials and Pharma & Biopharma markets due to weak momentum in China.

Nevertheless, growth in Academia & Gov’t, Food, Environmental & Forensics and Diagnostics and Clinical markets remained a positive.

Segmental Top Line Details

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

LSAG: The segment accounted for $927 million or 55% of its total revenues, down 9% on a reported as well as on a core basis from the respective prior-year fiscal quarter’s levels. This was due to macroeconomic uncertainties, soft market conditions in China and a sluggish pharma market. The reported figure came below the Zacks Consensus Estimate of $929 million.

ACG: Revenues from the segment were $396 million, accounting for 24% of total revenues. The figure surpassed the consensus mark of $377 million. The top line improved by 10% from the prior-year fiscal quarter’s reading on a reported basis and by 11% on a core basis, demonstrating solid momentum across all regions and end markets. A strong demand for the company’s services was a positive.

DGG: Revenues increased 3% from the prior-year fiscal quarter’s figure on a reported as well as a core basis to $349 million, accounting for the remaining 21% of total revenues. The figure came slightly below the consensus mark of $3508 million. Segmental growth was attributed to strength in the NASD business. A solid demand for diagnostic tests contributed well to the company’s pathology business.

However, weakness in genomics and Resolution Bioscience businesses was a negative.

Operating Results

For the fiscal third quarter, gross margin in the LSAG segment contracted by 50 basis points (bps) to 29.9% from the prior-year fiscal quarter’s number. ACG’s gross margin expanded by 390 bps to 50.9%. DGG’s gross margin contracted by 180 bps from the year-ago fiscal quarter’s actuals to 52.2%.

Research & development (R&D) costs were $118 million, up 1.7% from the prior-year fiscal quarter’s number. Selling, general & administrative (SG&A) expenses were $407 million, down 1.2% from the year-earlier fiscal quarter’s figure. As a percentage of revenues, R&D expenses expanded by 35 bps year over year to 7.05%. SG&A expenses expanded by 40 bps year over year to 24.3%.

Operating margin for the fiscal third quarter was 7.9%, which declined significantly from 23.9% in the year-earlier fiscal quarter’s figure.

Segment-wise, the operating margin for LSAG was down 60 bps from the year-earlier fiscal quarter’s level of 29.9%. ACG’s operating margin was 32.7%, up 810 bps from the year-ago fiscal quarter’s level. DGG segment’s operating margin expanded 250 bps to 24% from the year-ago fiscal quarter’s figure.

Balance Sheet & Cash Flow

As of Jul 31, 2023, Agilent’s cash and cash equivalents were $1.33 billion, up from $1.18 billion on Apr 30, 2023.

Accounts receivables were $1.3 billion at the end of third-quarter fiscal 2023, down from $1.4 billion at the end of second-quarter fiscal 2023.

Long-term debt was $2.734 billion for the reported quarter compared with $2.733 billion in the prior fiscal quarter.

Agilent generated $562 million in cash from operations during the reported quarter, up from $398 million generated in the previous quarter.

It returned $401 million to shareholders, out of which dividend payments accounted for $66 million and share repurchases accounted for the remaining $335 million.

Guidance

For the fiscal fourth quarter of 2023, management expects revenues of $1.655-$1.705 billion, suggesting a decline between 12.2% and 9.5% on a core basis from the year-ago fiscal quarter’s actuals.

Non-GAAP earnings per share are expected to be $1.33-$1.36.

For fiscal 2023, management lowered its revenue guidance to the band of $6.80-$6.85 billion from $6.93-7.03 billion, implying growth of 0.8-1.5% on a core basis from the respective fiscal 2022 figures.

Management also lowered the guidance for fiscal 2023 non-GAAP earnings per share downward from $5.60-$5.65 to $5.40-5.43.

How Have Estimates Been Moving Since Then?

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

The consensus estimate has shifted -16.1% due to these changes.

VGM Scores

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. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. 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. It's no surprise Agilent has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.