Agilent Technologies Expands Into Pharmaceutical Manufacturing

Agilent Technologies’ strategic acquisition of Biovectra significantly enhances its position in the growing market for specialized pharmaceutical manufacturing services. By expanding its capabilities in biologics, highly potent active pharmaceutical ingredients, and emerging therapeutic modalities, the company is well-positioned to capitalize on increasing demand for outsourced development and manufacturing services from biopharmaceutical companies.

What’s more, continued solid financial performance, disciplined capital allocation, and a focus on high-growth market segments make the firm attractive for those seeking exposure to the healthcare and life sciences sectors. The stock trades at 21.2 times the company’s forward earnings forecast.

We feel this is a reasonable multiple considering the company’s diversified and growth-oriented business model spanning life sciences, diagnostics, applied markets, and contract services.

AGILENT TECHNOLOGIES INC. (New York symbol A) 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.

In the fiscal 2025 first quarter, ended January 31, 2025, Agilent’s revenue rose 1.4%, to $1.68 billion from $1.66 billion a year earlier. That topped the consensus forecast of $1.67 billion.

However, earnings before unusual items in the quarter fell 0.8%, to $377 million, $380 million. The company repurchased $90 million of its shares in the quarter, which is why per-share earnings improved 1.6%, to $1.31 from $1.29. That topped the consensus estimate of $1.26.

By segment, Agilent’s Life Sciences and Diagnostics Markets Group saw revenue grow 4% reported to $647 million, while the Agilent CrossLab Group increased 1% to $696 million. The Applied Markets Group experienced a 4% decline to $338 million.

Agilent Technologies: Research spending at 7% of revenue drives continued innovation

Agilent is now streamlining its businesses to improve its long-term profitability with a “market-first strategy” and an initiative called “Ignite Transformation” aimed at making the company more nimble and more able to make faster customer service decisions.

As a result, the company expects its earnings for fiscal 2025 will rise about 5% to between $5.54 to $5.61 a share. The stock trades at 21.2 times the midpoint of that range. That’s a reasonable multiple as the company is a leader in its niche market and spends a high 7% of its revenue on research. The $0.99 dividend yields 0.8%.

Recommendation in Wall Street Stock Forecaster: Agilent Technologies Inc. is a buy.

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Jim Bates

Jim is an associate editor at TSI Network. He is the lead reporter and analyst for The Successful Investor and Wall Street Stock Forecaster and a member of the Investment Planning Committee. Jim has held the Chartered Financial Analyst designation since 1992 and spent more than a decade at the Financial Post DataGroup before joining TSI Network. He has a Bachelor of Commerce degree from the University of Toronto.

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