Agilent is up 9.5% since it was spun off from its parent company 14 years ago. We take a look at the outlook for this tech stock which bases its growth on an aggressive acquisition strategy.
AGILENT TECHNOLOGIES INC. (New York symbol A; www.agilent.com) makes testing systems that help electronics firms improve their products. It also manufactures testing gear for medical research labs. Agilent was a unit of Hewlett-Packard until 1999, when Hewlett spun it off as a separate firm.
To cut its exposure to the cyclical electronics industry, Agilent is expanding its medical and drug-testing businesses, mainly through acquisitions. Agilent’s purchases are also expanding its geographic reach. International markets, mainly in Asia, now supply 70% of its sales.
Agilent earned $269 million in its fiscal 2013 second quarter, which ended April 30, 2013. That’s down 2.2% from $275 million a year earlier. Due to fewer shares outstanding, earnings per share fell 1.3%, to $0.77 from $0.78. Revenue was flat at $1.7 billion. Mobile phone makers bought less testing equipment.
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Tech stocks: Latest acquisition strengthens Agilent’s position in medical testing equipment
Agilent’s medical equipment sales benefited from last year’s $2.2-billion purchase of Dako, a Denmark-based firm whose products detect cancer in blood and other tissue samples. Thanks to deals like this, medical-and chemical-testing equipment now supplies half of Agilent’s overall sales.
Agilent is now cutting 2% of its workforce. Without severance and other restructuring costs, Agilent expects to earn $2.70 to $2.85 a share for all of fiscal 2013.
The stock trades at 16.6 times the midpoint of that earnings range. The $0.48 dividend yields 1.0%.
In the latest edition of Wall Street Stock Forecaster, we look at Agilent’s earnings outlook and weigh the savings the company will realize through workforce cuts against its high research spending. We conclude with our clear buy-hold-sell advice on the stock.
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In your experience, which have been more successful—companies that pursue acquisitions regularly as part of their growth strategy, or those that undertake one big acquisition? Do any specific examples stand out for you? Let usk now what you think.
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