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Last Update: 15-Aug-18 11:01 ET
Agilent: Investors twiddling their thumbs after in-line results, guidance (A)
After matching market expectations for third quarter sales
and giving in-line guidance, shares of Agilent (A 64.78, -1.97, -2.95%) trade
lower, though all indications are that tariff impacts on Agilent could be
manageable.
All told, third quarter earnings per share (EPS) of $0.67 and revenue growth of 8% to $1.20 bln were in-line with what the Street had expected. Agilent also delivered adjusted operating margins of 22.6%, an increase of 110 basis points from a year ago.
Breaking it down by segment, Agilent saw core growth of 8% in its pharma segment, managing a strong showing even while facing a tough quarter for comparison in the form of last year’s 10% Q3 growth. The company sees strength across all its business groups in this segment and applauds particularly strong performances in mass spectrometry, cell analysis, CrossLabs consumables and services, and genomics.
Chemical and energy markets revenue, meanwhile, was up 12% against a difficult prior-year compare of 10%. The company reports that ongoing market investment has continued to remain positive even with the strain and uncertainty of tariff rhetoric and retaliatory policies. The company thanks performance China and Europe for leading the overall global growth.
Revenue growth of 3% in academia and government was in line with expectations. Strong performance from cell analysis, molecular spectroscopy, ICP-MS and CrossLabs services and consumables drove results in the segment. Notably, China and the rest of Asia have delivered double-digit growth in this end market.
Diagnostics and clinical revenue grew 5%. Genomics and the company’s Reagent Partnership business contributed strength, offsetting continued challenges in the U.S. Pain Management market. Food revenue declined 1%, strength in the Americas offset by declines in Europe versus a tough compare of 35% growth rate last year, and, as expected, China instrument sales were also down this quarter. Environmental forensics was flat in Q3, while forensics growth was offset by the expected temporary slowing of instrument sales in China environmental. Still, big picture, the company sees its overall China business as strong, noting that it saw growth of 10% in the quarter.
In terms of guidance, Agilent expects Q4 revenues of $1.24-1.26 bln and EPS of $0.72-0.74. FX is projected to have a negative impact of $21 mln on revenue and $2 mln on the operating profit. The company’s 23.6% adjusted operating margin at midpoint will be up 100 basis points sequentially and up 30 basis points on a year/year basis even after funding the Lasergen R&D.
Further, the increase in tariffs, effective early July, is expected to have a negative impact of $3.5 mln as the company has initiated actions to its supply chain. When those actions are completed in mid-2019, Agilent expects the net annualized impact to be around $9 mln excluding potential pricing actions.
For the full year 2018, revenue growth is projected at 6.1% at the midpoint on a core basis or 60 basis points over the previous guidance. The company’s FY18 revenue guidance of $4.86-4.88 bln is $10 mln over previous guidance, including $22 mln due to the acquisition of AATI, ULTRA Scientific, and ProZyme, with currency having a negative impact of $32 mln. The company’s EPS guidance of $2.69-2.71 ($2.70 at midpoint) is up $0.05 on previous guidance and corresponds to a 14% year/year increase. Adjusted operating margin for the year is expected to be 22.6%, or 60 basis point higher than was achieved in fiscal year 2017. Lastly, the company’s core operating margin incremental is expected to be 39% for the fiscal year, at the high end of its operating model.
Investors have shown a bit of a ho-hum reaction to Agilent’s report. Perhaps something of a wait-and-see attitude is prevailing as investors watch for the company to continue to execute on its FY18 plan. Shares trade between the 200-day simple moving average (67.17) and the 50-day (64.36), holding a nearly 2.4% loss on the year. The stock has been strong recently, though, up 5.7% since the start of July.
All told, third quarter earnings per share (EPS) of $0.67 and revenue growth of 8% to $1.20 bln were in-line with what the Street had expected. Agilent also delivered adjusted operating margins of 22.6%, an increase of 110 basis points from a year ago.
Breaking it down by segment, Agilent saw core growth of 8% in its pharma segment, managing a strong showing even while facing a tough quarter for comparison in the form of last year’s 10% Q3 growth. The company sees strength across all its business groups in this segment and applauds particularly strong performances in mass spectrometry, cell analysis, CrossLabs consumables and services, and genomics.
Chemical and energy markets revenue, meanwhile, was up 12% against a difficult prior-year compare of 10%. The company reports that ongoing market investment has continued to remain positive even with the strain and uncertainty of tariff rhetoric and retaliatory policies. The company thanks performance China and Europe for leading the overall global growth.
Revenue growth of 3% in academia and government was in line with expectations. Strong performance from cell analysis, molecular spectroscopy, ICP-MS and CrossLabs services and consumables drove results in the segment. Notably, China and the rest of Asia have delivered double-digit growth in this end market.
Diagnostics and clinical revenue grew 5%. Genomics and the company’s Reagent Partnership business contributed strength, offsetting continued challenges in the U.S. Pain Management market. Food revenue declined 1%, strength in the Americas offset by declines in Europe versus a tough compare of 35% growth rate last year, and, as expected, China instrument sales were also down this quarter. Environmental forensics was flat in Q3, while forensics growth was offset by the expected temporary slowing of instrument sales in China environmental. Still, big picture, the company sees its overall China business as strong, noting that it saw growth of 10% in the quarter.
In terms of guidance, Agilent expects Q4 revenues of $1.24-1.26 bln and EPS of $0.72-0.74. FX is projected to have a negative impact of $21 mln on revenue and $2 mln on the operating profit. The company’s 23.6% adjusted operating margin at midpoint will be up 100 basis points sequentially and up 30 basis points on a year/year basis even after funding the Lasergen R&D.
Further, the increase in tariffs, effective early July, is expected to have a negative impact of $3.5 mln as the company has initiated actions to its supply chain. When those actions are completed in mid-2019, Agilent expects the net annualized impact to be around $9 mln excluding potential pricing actions.
For the full year 2018, revenue growth is projected at 6.1% at the midpoint on a core basis or 60 basis points over the previous guidance. The company’s FY18 revenue guidance of $4.86-4.88 bln is $10 mln over previous guidance, including $22 mln due to the acquisition of AATI, ULTRA Scientific, and ProZyme, with currency having a negative impact of $32 mln. The company’s EPS guidance of $2.69-2.71 ($2.70 at midpoint) is up $0.05 on previous guidance and corresponds to a 14% year/year increase. Adjusted operating margin for the year is expected to be 22.6%, or 60 basis point higher than was achieved in fiscal year 2017. Lastly, the company’s core operating margin incremental is expected to be 39% for the fiscal year, at the high end of its operating model.
Investors have shown a bit of a ho-hum reaction to Agilent’s report. Perhaps something of a wait-and-see attitude is prevailing as investors watch for the company to continue to execute on its FY18 plan. Shares trade between the 200-day simple moving average (67.17) and the 50-day (64.36), holding a nearly 2.4% loss on the year. The stock has been strong recently, though, up 5.7% since the start of July.
