Shares of Agilent Technologies (A) were trading roughly flat over the past trading week. The measurement company which provides bio-analytical and electronic measurement solutions reported its fourth quarter results on Monday.
Fourth Quarter Results
Agilent Technologies reported fourth quarter revenues of $1.77 billion, up 2% on the year before. Orders during the quarter came in unchanged at $1.75 billion, for a book-to-bill ratio of 0.99. Analysts expected Agilent to report revenues of $1.76 billion.
The company reported fourth quarter GAAP earnings of $425 million, up from $289 million last year. Earnings per share rose from $0.82 last year to $1.20 per share this quarter. Net earnings were boosted by a $227 million tax benefit.
Non-GAAP income came in at $303 million, or $0.86 per diluted share, thereby comfortably beating analysts expectations of $0.80 per share for the quarter.
CEO Bill Sullivan commented on the results:
Agilent's performance in the fiscal fourth quarter met our revenue guidance and exceeded EPS guidance. Despite a very challenging economic environment, the strength of our operating model was evident, with operating margins for the quarter and the year at all-time high.
Revenues for the life science business came in unchanged at $401 million. Orders came in at $417 million, for a book-to-bill ratio of 1.04. Gross margins rose 4 percent to 53%, resulted in an operating income growth of 25% to $71 million.
Revenues for the chemical analysis business fell 2.7% to $394 million. Orders were unchanged at $421 million, for a book-to-bill ratio of 1.07. Gross margins rose a percent to 53% for an unchanged operating income of $97 million.
Revenues for the electronic measurement division fell 4.6% to $816 million, with orders falling to $755 million, for a book-to-bill ratio of 0.92. Operating margins fell by a percent to 57%, with operating income falling to $189 million.
Diagnostics and Genomics
The diagnostics division reported an incredible 126% revenue growth to $156 million. Orders rose to $158 million, for a book-to-bill ratio of 1.01. Operating income rose to $26 million, with gross margins coming in unchanged at 63%. Growth in the segment was driven by the $2.2 billion acquistion of Danish Dako.
For the first quarter of its fiscal 2013, the company expects revenues to come in between $1.68 and $1.70 billion. Non-GAAP earnings are expected to come in between $0.65 and $0.67 per share.
Analysts expected Agilent to guide for first quarter revenues of $1.73 billion on which the company was expected to earn $0.76 per share.
For the full year of its fiscal 2013, Agilent expects to generate revenues to come in between $7.0 and $7.2 billion. The company guides for non-GAAP earnings of $2.80-$3.10 per share.
Analysts thought that Agilent could earn $3.34 per share for the full year of its fiscal 2013 on revenues of $7.17 billion.
Agilent ended its fourth quarter with $2.4 billion in cash and equivalents. The company operates with roughly $2.4 billion in short and long term debt, for a flat net cash position.
Full year revenues for its fiscal 2012 came in at $6.9 billion. Agilent reported a net profit of $1.15 billion, or $3.27 per diluted share.
The market currently values Agilent at $12.8 billion. This values the company at 1.9 times 2012s annual revenues and 11-12 times annual earnings. The company trades at 1.8 times 2013s annual revenues and 12-13 times annual non-GAAP earnings. Historically, the difference between GAAP and non-GAAP earnings have not been extremely large.
Agilent initiated a $0.10 quarterly dividend earlier this year, for an annual dividend yield of 1.1%.
Some Historical Perspective
Year to date, shares of Agilent are trading with very modest gains of 5%. Shares started the year around $35 in January and quickly rose to $46 during spring. Shares fell back to $35 during the summer, and are currently exchanging hands at $37 per share.
Shares of Agilent traded around the $35 mark during 2007 and 2008, and fell to lows of $14 in 2009 during the financial crisis. Shares quickly advanced to $53 in 2011, after which shares lost roughly a third of their value. Between its fiscal 2009 and 2012, Agilent reported a 53% growth in revenues coming in at $6.9 billion in 2012. The company reported a $31 million loss in 2009, followed by a $1.15 billion profit this year.
Investors are slightly disappointed with a rather modest weak outlook for the coming year. The valuation of 1.8 times annual revenues and 12-13 times annual non-GAAP earnings is fairly attractive. Shares of competitors Thermo Fisher (TMO) and Danaher (DHR) trade at 1.9 and 2.3 times annual revenues, respectively. These competitors trade at 20 and 17 times annual earnings.
Agilent has plenty of liquidity, some 18% of its market capitalization consist out of cash and equivalents, and it operates with a flat net debt position. The business gradually grows, driven by bolt-on acquisition including that of Dako. The strong financial position allowed the company to initiate a modest quarterly dividend of $0.10 per share.
I think current levels offer a compelling opportunity. Shares are fairly valued despite the weakness at the large electronic measurement division. Furthermore, there is financial room for share repurchases and future dividend hikes.
Agilent offers long term value at these levels.