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Agilent Technologies Combines Life Sciences and International Growth

By    |   Friday, 29 June 2012 02:09 PM

Agilent Technologies (A) combines two interesting trends in the market, demand for health and life science products and services and increasing incomes abroad. While many companies are scrambling to develop international markets, Agilent already earns the majority of its revenues outside the United States.

Agilent Technologies is a measurement company providing core bio-analytical and electronic measurement solutions to the communications, electronics, life sciences and chemical analysis industries. For the fiscal year ended Oct. 31, 2011, Agilent had three business segments comprised of the electronic measurement business, the chemical analysis business and the life sciences business.

The electronic measurement business addresses the communications, electronics and other industries. The chemical analysis business focuses on the petrochemical, environmental, forensics and food safety industries.

Finally, the life sciences business focuses on the pharmaceutical, biotech, academic and government, bio-agriculture and food safety industries. In addition, the company conducts centralized research through Agilent Technologies Laboratories.

On May 14, 2010, Agilent acquired Varian, a leading supplier of scientific instrumentation and associated consumables for life science and applied market applications, for a total cash purchase price of approximately $1.5 billion. Varian's products include analytical instruments, research products and related software, consumable products, accessories and services, as well as vacuum products and related services and accessories.

Total net revenue of $6.6 billion for the fiscal year was generated 30 percent in the United States and 70 percent outside USA.

“For the second quarter, we expect revenues in the range of $1.7 billion to $1.72 billion. Non-GAAP earnings are expected to be in the range 71 cents to 73 cents per share. The midpoint of our EPS guidance for the year remains unchanged,” Agilent CEO William Sullivan said on a recent call with analysts.

In addition, Agilent initiated a quarterly dividend, recently yielding 1 percent.

Agilent Technologies has a market cap of $13.11 billion in a sector, life sciences tools and services, where the average company size is $1.24 billion. Its trailing 12-month P/E ratio is 12.13 and its five-year projected price-to-earnings-growth (PEG) ratio is 0.91.

Its projected earnings per share growth for the coming year is 13 percent, compared to a sector average of 13.85 percent.

Aggressive expansion

Wall Street is bullish on Agilent, with buy or outperform calls from Merrill Lynch, Citigroup Investment Research, Morgan Stanley, Longbow, UBS, Standard & Poor’s Equity Research, Deutsche Bank, Jefferies and Stifel Nicolaus.

“We have a favorable view of A's diversified end-market mix, with exposure to the non-cyclical life sciences and chemical analysis markets as well as cyclical electronic measurement markets.We also believe A is well positioned with geographical diversity and a growing presence in emerging markets,” S&P analysts wrote in mid-June.

“Over the long term, we expect A to focus on expanding aggressively through new product offerings in high-growth industries, complemented by opportunistic acquisitions in core markets.”

Agilent Technologies next reports on Aug. 15.

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