A recent $925 million acquisition represents a significant strategic move into the contract drug manufacturing space. This expansion lets the company offer a wider range of services to its existing client base while also tapping into an added roster of pharmaceutical and biotech clients.
Management’s decision to raise its full-year outlook is another bullish signal as the company is showing confidence in its ability to capitalize on its growth strategy and anticipated recovery in the drug development sector.
These factors could help it outperform the S&P500 over the next few years. Meanwhile, the stock trades at 26.8 times the company’s forward earnings forecast. This is a reasonable multiple for a market leader spending heavily in a specialized manufacturing niche.
AGILENT TECHNOLOGIES INC. (New York symbol A; www.agilent.com) makes specialized testing equipment for medical research laboratories and industrial clients. Its equipment includes mass spectrometers, used to analyze substances.
In September 2024, Agilent completed the acquisition of Biovectra Inc. Based in Charlottetown, PEI, this firm makes drugs on behalf of over 100 pharmaceutical and biotech clients. The company paid $925 million for this business.
Biovectra adds $113 million to Agilent’s annual revenue of $6.6 billion. However, the acquisition will cut its earnings in the first year by $0.05 a share. Even so, Biovectra’s expertise will let Agilent’s Diagnostics and Genomics division offer its clients a wider variety of services, particularly in fast-growing areas like gene-editing.
Growth Stocks: This leader beat Q3 expectations and raised its full-year outlook
Agilent reported better-than-expected quarterly earnings recently. It also raised its full-year outlook.
In the fiscal 2024 third quarter, ended July 31, 2024, revenue fell 5.6%, to $1.58 billion from $1.67 billion a year earlier. That topped the consensus forecast of $1.56 billion.
Earnings before unusual items in the quarter fell 8.8%, to $385 million from $422 million. Due to fewer shares outstanding, per-share earnings declined 7.7%, to $1.32 from $1.43. That topped the consensus estimate of $1.26.
Agilent expects demand from drug developers and manufacturers to improve as inflation eases and interest rates fall. As a result, its full-year revenue for 2024 should range between $6.45 billion and $6.50 billion, which is above the consensus estimates of $6.46 billion. The company also expects it will earn between $5.21 and $5.25 a share, compared with its previous forecast of between $5.15 and $5.25 per share.
The stock now trades at 26.8 times the midpoint of that new earnings range. That’s a reasonable multiple as the company is a leader in its niche market and spends a high 8% of its revenue on research. The $0.94 dividend yields 0.7%.
Recommendation in Wall Street Stock Forecaster: Agilent Technologies Inc. is a buy.
