The share price of the leading life sciences and diagnostics company Agilent Technologies, Inc. (A) has soared 58.9% over the past year and 12.4% over the past three months to close yesterday’s trading session at $151.46. The Santa Clara, Calif., company is focused on six key markets: Food, Environmental and Forensics, Pharmaceutical, Diagnostics, Chemical and Energy, and Research.
The company’s second-quarter results impressed investors. Also, the company raised its third-quarter and full-year outlook. It expects its revenue to be between $6.15 billion - $6.21 billion and its non-GAAP EPS to be between $4.09 - $4.14 per share in its fiscal year 2021. In addition, A expects its third-quarter revenue to be between $1.51 billion - $1.54 billion and its non-GAAP EPS to be between $0.97 - $0.99 per share. So, the stock’s near-term prospects look promising.
Note that A is one of the few stocks handpicked by our Chief Growth Strategist, Jaimini Desai, currently in the POWR Growth portfolio. Learn more here.
Here are the factors that we think could influence A’s performance in the coming months:
Positive Developments
A announced on July 20 that its PD-L1 IHC 22C3 pharmDx assay is now labeled for expanded use in the European Union for patients with non-small cell lung cancer. On the same day, the company announced the availability of an optimized and verified eMethod for PFAS Analysis in Water by LC/TQ for testing per- and polyfluoroalkyl substances (PFAS) in drinking and surface water using liquid chromatography and mass spectrometry.
Last month, SureSelect Human All Exon V8 was introduced by A. It is a new exome design that provides comprehensive content and up-to-date protein-coding regions from RefSeq, CCDS, and GENCODE. In addition, the company introduced the Agilent 8697 Headspace Sampler in March 2021.
Build and Buy Strategy
Expanding on its ‘build and buy’ growth strategy, A completed its acquisition of Resolution Bioscience on April 15. The move is expected to help the company expand its reach in next-generation sequencing (NGS)-based cancer diagnostics with the addition of Resolution Bioscience’s liquid biopsy-based diagnostic technologies. A’s CEO, Mike McMullen, said, “The Resolution Bioscience team and powerful technology are strategic and important additions to Agilent’s growing business in precision oncology solutions.”
Revenue Growth Across All Segments
A’s net revenue increased 23.2% year-over-year to $1.53 billion for its fiscal second quarter, ended April 30, 2021. The company’s revenue from its Life Sciences and Applied Markets Group increased 28.1% year-over-year to $674 million, and from its Diagnostics and Genomics Group increased 19.8% year-over-year to $315 million. In addition, A’s revenue from its Agilent CrossLab Group came in at $536 million in the quarter, up 19.4% year-over-year.
The company’s operating income increased 182.4% from the same period last year to $288 million. A’s non-GAAP net income for the quarter was $299 million, representing a 34.1% year-over-year rise. Its non-GAAP EPS increased 36.6% year-over-year to $0.97.
Favorable Analysts Estimates
Analysts expect A’s revenue to increase 8.3% for the quarter ending October 31, 2021, and 16.5% in its fiscal year 2021. The company’s EPS is expected to grow 26.9% for the current quarter, ending July 31, 2021, 26.2% in fiscal 2021, and 11.4% in fiscal 2022. Also, its EPS is expected to grow at a 10.8% rate per annum over the next five years.
POWR Ratings Reflect Rosy Prospects
A has an overall A rating, which equates to Strong Buy in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight different categories. A has a B grade for Value, which is in sync with its 7.31x forward P/S, which is 3.2% lower than the 7.55x industry average.
The stock has a B grade for Growth, which is consistent with analysts’ expectations that its revenue and EPS will grow significantly in the coming months. A also has a B grade for Sentiment. Of 19 analysts that have rated the stock, 15 rated it Strong Buy or Buy.
A has a B grade for Quality also. This is justified given its 21.35% and 26.61% respective trailing-12-month EBIT and EBITDA margins, which are higher than the 1.31% and 5.37% industry averages.
In addition to the POWR Ratings grades I’ve just highlighted we’ve also rated A for Stability and Momentum. Get all of A’s ratings here.
A is ranked #2 of 55 stocks in the Medical - Diagnostics/Research industry.
If one is looking for other top-rated stocks in the same industry with an Overall POWR Rating of Strong Buy or Buy, one can access them here.
Bottom Line
According to a Mordor Intelligence report, the clinical diagnostics market is expected to hit $93.85 billion by 2026. Ais well-positioned to benefit from the industry tailwinds. And while the stock hit its $152.41 all-time high on July 23, 2021, we think it still has plenty of upside to deliver. So, it’s wise to bet on the stock now.
Click here to checkout our Healthcare Sector Report for 2021
A shares were trading at $151.76 per share on Thursday morning, up $0.30 (+0.20%). Year-to-date, A has gained 28.65%, versus a 18.50% rise in the benchmark S&P 500 index during the same period.
About the Author: Manisha Chatterjee
Since she was young, Manisha has had a strong interest in the stock market. She majored in Economics in college and has a passion for writing, which has led to her career as a research analyst.
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