Agilent Technologies: Earnings Analysis

| About: Agilent Technologies (A)
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Agilent Technologies (NYSE:A) discussed its F3Q 2013 earnings yesterday. The company's shares are up over 2% as of the writing of this article. Based on the preliminary financial results for the quarter ended 2013-07-31 we analyzed Agilent relative to its peers (peer set at the end of this post).

The table below shows the preliminary results along with the recent trend for revenues, net income and returns.

Quarterly (USD million) 2013-07-31 2013-04-30 2013-01-31 2012-10-31 2012-07-31
Revenues 1,652.0 1,732.0 1,680.0 1,767.0 1,723.0
Revenue Growth % (4.6) 3.1 (4.9) 2.6 (0.6)
Net Income 168.0 166.0 179.0 425.0 243.0
Net Income Growth % 1.2 (7.3) (57.9) 74.9 (4.7)
Net Margin % 10.2 9.6 10.7 24.1 14.1
ROE % (Annualized) 13.3 12.5 13.6 33.8 20.3
ROA % (Annualized) 6.4 6.3 6.8 16.8 10.1

Agilent is in Harvesting mode

Agilent Technologies, Inc.'s current Price/Book of 3.2 is about median in its peer group. We classify Agilent as Harvesting because of the market's low expectations of growth (PE of 17.4 compared to peer median of 28.4) despite its relatively high returns (ROE of 19.4% compared to the peer median ROE of 8.6%).

The company attempts to achieve high profit margins (currently 13.7% vs. peer median of 10.6%) through differentiated products. It currently operates with peer median asset turns of 0.7x. Agilent's net margin has declined 3.1 percentage points from last year's high but remains above its five-year average net margin of 11.2.

Agilent Earnings seem to be Peaking

While the company's revenue growth has been above the peer median (15.2% vs. 12.1% respectively for the past three years), the stock's PE ratio of 17.4 is less than the peer median. This implies that the company's earnings are peaking and the market expects a decline in its growth expectations.

Under-Investing in Growth

Agilent's annualized rate of change in capital of 11.7% over the past three years is around the same as its peer median of 10.7%. This investment has generated a better-than-peer median return on capital of 14.2% averaged over the same three years. The greater than peer median rate of return suggest that the company may be under investing in growth.

Trend Charts

Peers used for analysis of Agilent

Agilent Technologies, Inc.'s analysis versus peers uses the following peer-set: Danaher Corporation (NYSE:DHR), Thermo Fisher Scientific Inc. (NASDAQ:TMO), Life Technologies Corporation (NASDAQ:IFE), AMETEK, Inc. (NYSE:AME), PerkinElmer, Inc. (NYSE:PKI), National Instruments Corporation (NASDAQ:NATI), JDS Uniphase Corporation (NASDAQ:JDS), Cognex Corporation (NASDAQ:CGNX) and Itron, Inc. (NASDAQ:ITRI).

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.