Why Is Agilent (A) Down 19.3% Since Last Earnings Report?

A month has gone by since the last earnings report for Agilent Technologies (NYSE:A). Shares have lost about 19.3% in that time frame, outperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Agilent due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Agilent Q1 Earnings In Line With Estimates, Revenues Top

Agilent Technologies’ fiscal first-quarter 2020earnings of 81 cents per share were inline with the Zacks Consensus Estimate. The bottom line decreased 9% sequentially but increased 7% year over year.

Fiscal first-quarter 2020 revenues of $1.36 billion increased 5.7% year over year (up 2.4% on a core basis). Also, the reported revenues — which came in above management’s guided range of $1.340-$1.355 billion — surpassed the Zacks Consensus Estimate by 0.2%.

The year-over-year revenue growth was driven by strength in all revenue segments.

Agilent was optimistic about the acquisition of BioTek Instruments, Inc., a provider of life science instrumentation. This deal expanded the company’s presence in the life science research space. It will further strengthen Agilent’s offerings related to live cell analysis, as these product lines aid in quantification of biomolecules, biomolecular interactions and cellular structure.

However, management expects delays in new equipment purchases in the near term. In addition, it expects a slower uptake of consumables and services due to reduced number of selling days resulting from the extension of Lunar New Year, including other operational factors.

Revenues by Segment

Agilent has three reporting segments — Life Sciences & Applied Markets Group (LSAG), Agilent Cross Lab Group (ACG), and Diagnostics and Genomics Group (DGG).

In the reported quarter, LSAG was the largest contributor to total revenues. The segment accounted for $638 million or 47% of its total revenues, reflecting a 5% increase from the prior-year quarter. The strong performance of the company’s biopharma and cell analysis business aided the results.

Revenues from ACG came in at $470 million, accounting for 35% of total revenues. The reported figure reflects a 6% year-over-year increase, driven by growth across all regions and market segments.

Revenues from DGG came in at $249 million, accounting for the remaining 18% of total revenues. The segment’s revenues were up 6% from the year-ago quarter.

Operating Results

Gross margin in the quarter was 53.3%, down 180 basis points (bps) year over year. The decrease was due to an unfavorable product mix.

Operating expenses (research & development as well as selling, general & administrative) were $508 million, 11.2% higher than the year-ago quarter.

As a result, adjusted operating margin was 15.8%, down 370 bps from the year-ago quarter.

Balance Sheet

At the end of the fiscal first quarter, inventories totaled $706 million, up from $679 million in the prior quarter. Agilent’s long-term debt was $1.79 billion at the end of the quarter. Cash and cash equivalents were $1.23 billion compared with $1.38 billion in fiscal fourth-quarter 2019.

Guidance

Agilent provided guidance for the fiscal second quarter and 2020.

For the fiscal second quarter, the company expects revenues between $1.28 billion and $1.32 billion, and earnings per share in the range of 72-76 cents.

For fiscal 2020, Agilent maintained its revenue guidance in the range of $5.50-$5.55 billion, indicating core growth of 4-5%. Non-GAAP earnings are projected in the range of $3.38-$3.43 per share.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -5.47% due to these changes.

VGM Scores

Currently, Agilent has a poor Growth Score of F, however its Momentum Score is doing a lot better with a C. However, the stock was allocated a grade of F on the value side, putting it in the lowest quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Agilent has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.