Agilent: Stability In An Unstable World

Jun. 08, 2020 5:12 PM ETAgilent Technologies, Inc. (A) StockA
The Stock Dudar
1.12K Followers

Summary

  • Agilent isn't exciting, but there's value in stability.
  • Agilent appears fully valued in the current interest rate environment.
  • On a pullback into the ~$74 range, I'd consider dipping in a toe.

Agilent Overview

Originally a 1999 spin-off of Hewlett-Packard, Agilent Technologies (NYSE:A) is an established life sciences and diagnostics company operating out of Santa Clara, CA. Agilent underwent its own spin-off of Keysight Technologies (KEYS) in 2014, separating out technical and electronic instrumentation and leaving Agilent as a pure-play healthcare company. Mr. Mike McMullen was appointed Agilent CEO in March 2015, although he has been with the company since 1984. Given the significant changes in the 2014-15 time frame, this article will focus primarily on Agilent from 2015 going forward.

Business Dynamics & Financials

Agilent operates three segments: Life Sciences and Applied Markets Group (LSAG), Diagnostics and Genomics Group (DGG), and Agilent CrossLab Group (ACG). The company produces products like cell imaging systems and microplate readers, and performs tasks like DNA methylation profiling and raman spectroscopy (finally, we'll figure out what makes those noodles so delicious). Breaking revenue down by segment:

LSAG ACG DGG
Q1 '20 Revenue $638M $470M $249M
Y/Y Growth 5% 6% 6%
Y/Y Growth (core*) -2% 7% 7%
Y/Y Operating Margin -1.3% 1.5% -0.5%

*Core growth is adjusted for acquisitions, divestitures, and FX

Overall, Q1 of 2020 was fairly typical for Agilent as they've delivered about 6% revenue growth every year since 2015. Let's look closer at each segment.

Life Sciences and Applied Markets Group - The noticeable difference in core vs. non-core revenue growth is primarily attributable to the acquisition of BioTek for roughly $1B (after tax benefits) growing at roughly 10% with 2018 revenue of $162. The core growth story is not as bleak is it first appears due to the COVID-19 outbreak in China, but given the spread of the virus since then, we're unlikely to see anything beyond low single-digit growth this year from LSAG. Management suggested that sales were simply delayed rather than lost. Reasonable given the instrument heavy business in China, but

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