Will New Technologies Benefit Agilent (A) In Q2 Earnings?

Agilent Technologies (NYSE:A) is set to report fiscal second-quarter 2018 results on May 14. In the last reported quarter, it delivered a positive earnings surprise of 13.79%.

The company’s surprise history has been pretty impressive. It beat estimates in each of the trailing four quarters, with an average positive earnings surprise of 13.61%.

Notably, on a 12-month basis, Agilent’s shares have returned 22.5%, underperforming the industry’s gain of 17.6%.

Let’s see how things are shaping up for this announcement.

Strength in ACG Segment to Drive Revenues

In the last reported quarter, the Agilent Cross Lab Group (ACG) revenues came in at $408 million. Both services and consumables witnessed growth. China and Food led growth across all regions and major end-markets.

The figure is expected to further increase in the to-be-reported quarter, driven by strength in services and consumables across all geographical regions. The Zacks Consensus Estimate for the quarter to be reported is pegged at $419 million.

Strength in DGG & LSAG Serve As Big Positives

In the last reported quarter, revenues from the company’s Diagnostics and Genomics Group (DGG) came in at $185 million, up year over year driven by strength in pharma, diagnostic and clinical end-markets. All businesses under this group (Dako, Genomics and Nucleic Acid Solutions) performed well. The segment is also expected to perform well in the soon-to-be-reported quarter. The Zacks Consensus Estimate for the fiscal second quarteris pegged at $223 million.

Also, the Life Sciences & Applied Markets Group (LSAG) segment is expected to perform well in the quarter, driven by strong performances in chemical and energy, and pharma and environmental markets. The Zacks Consensus Estimate for the fiscal second quarter is pegged at $555 million.

Other Growth Drivers

Agilent Technologies is a broad-based OEM of test and measurement equipment. The company has shifted its focus to life sciences, genomics, diagnostics and wireless test markets, in which it has made a few important acquisitions and alliances.

Agilent’s broad-based portfolio and increased focus on its segments offer higher growth potential. The company’s decision to divest/wind up underperforming businesses has enhanced its focus on the new Agilent, while enabling expansion of a solid recurring revenue base, and diversification of geographic and industrial operations for growth. Also, the company’s focus on aligning investments toward more attractive growth avenues and innovative product launches is also a positive.

However, macro weakness in some regions and unfavorable foreign exchange remain concerns.

What Our Model Suggests

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP.

Zacks Rank #4 (Sell) or 5 (Strong Sell) stocks are best avoided, especially if these have a negative Earnings ESP. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Agilent Technologies has a Zacks Rank #2 and an Earnings ESP of -2.48%, a combination that does not suggest that the company is likely to beat estimates this time around.

Stocks to Consider

We see likely earnings beat for each of the following companies:

Thomson Reuters Corporation (TO:TRI) has an Earnings ESP of +7.36% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Rexnord Corporation (NYSE:RXN) has an Earnings ESP of +1.82% and a Zacks Rank of 2.

GAIN Capital Holdings, Inc. (NASDAQ:GAIN) has an Earnings ESP of +5.56% and a Zacks Rank #3.

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