AGILENT TECHNOLOGIES INC. (New York symbol A) plans to break itself into two publicly traded companies. One of these businesses will keep the Agilent name and focus on testing equipment for medical-research labs.
The second company will make testing systems for improving electronics, such as cellphones and computer equipment.
In the parent company’s 2013 fiscal year, which ended October 31, 2013, the division that will carry on as Agilent saw its sales rise 9.9%, to $3.9 billion from $3.5 billion in fiscal 2012. That’s mainly due to strong demand from pharmaceutical makers, and rising sales of gear for testing food safety in China and other developing countries. This company will pay a dividend comparable to Agilent’s current 1.0% yield.
The spinoff company’s fiscal 2013 revenue fell 12.9%, to $2.9 billion from $3.3 billion. That’s partly because U.S. budget cuts hurt demand from aerospace and defence clients. However, new testing systems for wireless networks should boost this firm’s revenue in fiscal 2014. This second firm will not pay a dividend, at least initially.
Tech stocks: Breakup into two companies to be completed in November 2014
Overall, Agilent’s fiscal 2013 revenue fell 1.1% from a year earlier, which pushed down its earnings by 9.5%, to $995 million from $1.1 billion. Due to fewer shares outstanding, earnings per share fell 7.7%, to $2.88 from $3.12. The company spent $704 million (or 10.4% of its revenue) on research, up 5.4% from $668 million (or 9.7% of revenue).
Agilent will hand out shares in the electronics-testing business to its current investors, who will only be liable for capital gains taxes on their new shares when they sell them.
Shareholders and regulators must approve the breakup, but the company aims to complete it in November 2014.
In the latest edition of Wall Street Stock Forecaster, we weigh the pros and cons of Agilent’s spinoff of its electronic-testing business. We also look at the company’s earnings outlook for next year as it prepares for the breakup. We conclude with our clear buy-hold-sell advice on the stock.
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