Agilent Technologies, Inc. (A) is a global leader in life sciences, diagnostics and applied chemical markets, providing application focused solutions that include instruments, software, services and consumables for the entire laboratory workflow.

In mid-May, Agilent released Q2 results in which FY2019 Revenue guidance was lowered but Non-GAAP diluted EPS guidance remained unchanged at $3.03 - $3.07/share.

Summary

  • A’s sub 1% dividend yield will hold little appeal to dividend seeking investors.
  • The company consistently generates positive Free Cash Flow.
  • A regularly repurchases outstanding shares with the weighted average number of shares outstanding in FY2009 (~346 million) expected to be down to ~317 million by the end of Q3 2019.
  • A recently announced its intent to acquire privately held BioTek Instruments which appears to be a fair price and which will contribute to A’s growth.
  • A’s Life Sciences and Applied Markets business segment is experiencing challenges in China which has led management to lower FY2019 revenue guidance. Non-GAAP diluted EPS guidance remains unchanged.
  • As much as A appeals to me I fully expect a market pullback of some magnitude in 2019. As a result I am in no hurry to initiate a position in A.

Introduction

Many investors may be unfamiliar with Agilent Technologies Inc. (A) despite it being a company with a ~21.7B market cap.

It was formed in March 1999 when Hewlett-Packard announced a plan to create a separate company that comprised Hewlett-Packard's test and measurement, semiconductor products, healthcare solutions and chemical analysis businesses, related portions of Hewlett-Packard Laboratories, and associated infrastructure.

Business Overview

A is a global leader in life sciences, diagnostics and applied chemical markets, providing application focused solutions that include instruments, software, services and consumables for the entire laboratory workflow.

In 2018, A re-organized its operating segments and moved the microfluidics business from the life sciences and applied markets operating segment to the diagnostics and genomics operating segment. A now has 3 business segments comprised of the life sciences and applied markets business, diagnostics and genomics business and the Agilent CrossLab business.

Life Sciences and Applied Markets (LSAG)

This business provides application-focused solutions that include instruments and software that enable customers to identify, quantify and analyze the physical and biological properties of substances and products. Its solutions also allow customers in the clinical and life sciences research areas to interrogate samples at the molecular and cellular level.

Diagnostics and Genomics (DG)

This business is comprised of 6 areas of activity providing solutions that include reagents, instruments, software and consumables which enable customers in the clinical and life sciences research areas to interrogate samples at the cellular and molecular level.

Agilent CrossLab (ACG)

This business spans the entire lab with its extensive consumables and services portfolio, which is designed to improve customer outcomes.

A conducts centralized order fulfillment and supply chain operations for its businesses through the order fulfillment and supply chain organization (“OFS”). OFS provides resources for manufacturing, engineering and strategic sourcing to our respective businesses.

Each business, together with OFS and Agilent Technologies Research Laboratories, is supported by A’s global infrastructure organization, which provides shared services in the areas of finance, information technology, legal, certain procurement services, workplace services and human resources.

Products are sold primarily through direct sales, but distributors, resellers, manufacturer's representatives and electronic commerce are also used.

As at A’s most recent FYE (October 31, 2018), it employed ~14,800 people worldwide. Primary research and development and manufacturing sites are in California, Colorado, Delaware, Massachusetts and Texas in the U.S. and in Australia, China, Denmark, Germany, Italy, Japan, Malaysia, Singapore and the United Kingdom.

BioTek Instruments Acquisition

On July 11th, A announced that it had signed a definitive agreement to acquire privately-owned BioTek Instruments for $1.165B. The net purchase price is expected to be ~$1.05B when anticipated tax benefits for A are taken into consideration.

BioTek generated revenues of $0.162B in FY2018 with ~10% growth expected in FY2019.

BioTek is a global leader in the design, manufacture and distribution of innovative life science instrumentation. Its comprehensive product line includes cell imaging systems, microplate readers, washers, dispensers, automated incubators and stackers. These products enable life science research by providing customers with high performance, cost-effective analysis across diverse applications.

Additional details can be found in this Press Release.

Please click here to read the complete version of this article.

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Disclosure: I do not currently hold a position in A nor do I intend to initiate a position within the next 3 business days.

I wrote this article myself and it expresses my own opinions. I am not receiving compensation for it and have no business relationship with any company whose stock is mentioned in this article.