On Tuesday night, it's time for a third-quarter update from testing equipment maker Agilent (NYSE: A). The former Hewlett-Packard (NYSE: HPQ) division is testing new ways to make a profit. Let's see how well that's expected to work out.
What analysts say:
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Buy, sell, or waffle? Nine Wall Street analysts follow Agilent today. Five of them want to buy the stock; the other four prefer to hold. In our Motley Fool CAPS investor community, it's a middling three-star issue based on market data and 220 user ratings.
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Revenues. The analysts are looking for about $1.39 billion, up 11% from last year on a continuing operations basis. That's in the bottom half of management's guidance range, $1.38 billion to $1.42 billion.
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Earnings. Earnings are expected to increase, though, to the tune of $0.48 per share, compared to $0.46 per share a year ago. The company expects to land in the $0.46 to $0.50 range per share.
What management says:
Agilent built up a healthy order backlog in the last quarter, and CEO Bill Sullivan said, "The pick-up in second quarter Electronic Measurement bookings to 8% growth, combined with the steady 14% growth in Bio-Analytical orders, bodes well for Agilent's prospects in the second half of this year."
What management does:
In December 2005, Agilent spun out its semiconductor segment to Kohlberg Kravis Roberts and Silver Lake Partners for a tidy $2.6 billion. That was only months after letting the semiconductor testing division loose as publicly traded Verigy (Nasdaq: VRGY). You can clearly see those periods rolling off the trailing-12-month figures here, as the operating and net income margins jumped up about a year later. Agilent is now focused on biometrics and electronics measurements only.
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Margins
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1/2006
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4/2006
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7/2006
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10/2006
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1/2007
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4/2007
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Gross
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53.4%
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53.5%
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55.2%
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55.3%
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55.6%
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56.6%
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Operating
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10.2%
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11.4%
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12.9%
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31.1%
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31%
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31.7%
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Net*
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7.6%
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8.5%
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9.3%
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20.2%
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19.8%
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19.8%
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FCF/Revenue
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10.6%
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12.7%
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10.3%
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9%
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13.4%
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13.1%
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*Excluding one-time items and assuming a 37.5% uniform tax rate.
All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.
One Fool says:
Those divestitures were meant to remove Agilent from the highly cyclical semiconductor market and thusly stabilize earnings and revenues going forward. The company also unloaded a significant portion of its PP&E (property, plant, and equipment) assets with those segments, making for a lighter, more nimble balance sheet and organization.
This is yet another company eager to profit from the ongoing high-def entertainment trend by selling HDMI signal testers to electronics manufacturers and servicers. The same goes for WiMAX ultrawideband wireless networking, and high-speed 802.11n WiFi networks, and ...
You get the picture. Anywhere there's a new technology standard on the move that involves moving data from one point to another, Agilent's electronics division will be there, pushing and probing -- and making money. The bio-analytics division does the same thing to human bodies, another lucrative opportunity as the baby boomers move into their golden years.
Our CAPS players haven't yet given a serious nod to this sector, as Agilent's three stars make it a ratings leader alongside Aeroflex (Nasdaq: ARXX). JDS Uniphase (Nasdaq: JDSU) has to settle for two measly stars, and Keithley Systems (NYSE: KEI) gets our lowest rating of one star. Verigy prances around with five stars on its chest, though. Is this entirely fair? Feel free to click on over and share your opinion today -- it's free, it's fun, and it helps everybody profit.
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Fool contributor Anders Bylund holds no position in any of the companies discussed here. You can check out Anders' holdings if you like, and Foolish disclosure is the prognosticator of prognosticators.
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