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Agilent Preview: Will it Miss?

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Agilent Technologies Inc. (A - Free Report) is set to report first quarter 2013 results on Feb 14. Last quarter it posted a 5% positive surprise. Let’s see how things are shaping up for this announcement.

Growth Factors this Past Quarter

Though Agilent was affected by the recent economic downturn, the company’s sales growth rates in the fourth quarter were above the prior quarter and better than Zacks consensus owing to strong performance in all the segments except Electronic Measurement segment. In particular, the company’s life sciences segment has been improving over the last few quarters due to the launch of some new products.

The strength in the new Diagnostics segment was a positive for overall gross margin, since the segment generates significantly higher gross margins than the legacy Agilent business. Also, the company’s efficient cost management contributed to margin expansion in the last quarter.

Though we believe that the company’s efforts to introduce new products will generate strong growth and help to grow its market share, the heavy expenditure incurred due to the launch of these products and higher input costs will remain a challenge for the company. Also, the lingering macro conditions will continue to affect the spending environment, not allowing much improvement in the company’s results in the near term.

Earnings Whispers?

The Zacks Consensus Estimate for the first quarter stands at 66 cents while that for fiscal 2013 stands at $3.03.

Agilent has missed estimates once in the last four quarters, met estimates once, while beating estimates the other two times. Moreover, the stock has seen downward estimate revisions in the past 60 days.

The Zacks Consensus Estimate has remained unchanged for the first quarter but was down by 0.3% for 2013 over the last 60 days. Over the last 90 days, the Zacks Consensus Estimate has gone down by almost 12.0% and 9.6%, respectively for the first quarter and fiscal 2013.

The downward pressure on estimates signals a weak first quarter. Moreover, the stock carries a Zacks Rank #3 (Hold).

We caution against stocks with a Zacks Rank #4 and #5 (Sell rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Other Stocks to Consider

Our model states that astock needs to have both a positive earnings ESP (Read: Zacks Earnings ESP: A Better Method) and a Zacks Rank #1, #2 or #3 to beat earnings estimates. You could, therefore, consider the following stocks instead: 

Autodesk Inc. (ADSK - Free Report) , with an ESP of +15.79% and a Zacks Rank #2 (Buy).

Netflix Inc. (NFLX - Free Report) , with an ESP of +38.46% and a Zacks Rank #2 (Buy)

Scientific Games Corporation (SGMS - Free Report) , with an ESP of +33.33% and a Zacks Rank #3 (Hold)

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