Will Agilent's Split Help It Fend Off Danaher and General Electric?

Agilent Technologies (A 3.95%) will release its quarterly report on Thursday, and shareholders of the measurement and bio-analytics company have been quite pleased by the company's recent move to break itself into two component parts. Yet even if investors are happy about the potential unlocking of shareholder value, the bigger question is whether the move will make Agilent more competitive against Danaher's (DHR 7.21%) diagnostics business and potentially keep General Electric (GE 8.28%) from emphasizing the health-care side of its conglomerate business more heavily than it has lately.

Agilent Technologies bills itself as the world's premier measurement company, making products in the life sciences and chemical analysis areas as well as in electronics and communications. Originally spun off from Hewlett-Packard in 1999, Agilent still owes much of its recent progress to the vision that the two founders of HP instilled in its corporate culture. But as the success of Agilent, Danaher, and other players in the industry attracts potential new entrants like General Electric, competition is only likely to get fiercer. Let's take an early look at what's been happening with Agilent Technologies over the past quarter and what we're likely to see in its report.

Stats on Agilent Technologies

Source: Yahoo! Finance.

Will Agilent Technologies be better off divided than united?
In recent months, analysts have gotten a bit more enthusiastic about Agilent's earnings prospects, boosting fiscal 2013 estimates by about 2% and fiscal 2014 projections by almost 1%. The stock has done well, climbing 11% since early August.

Agilent came into the quarter on a mixed note, as its July quarter earnings fell more than 30% but still eclipsed what investors had expected from the company. The company's life sciences, chemical analysis, and diagnostics and genomics divisions managed to boost sales, but its electronic measurement division suffered declines in revenue. Agilent gave fairly solid guidance for its full fiscal year, guiding to the top end of its earnings range but toward the lower end of previous revenue projections.

But the big news for Agilent came in September, when it combined its life sciences and diagnostics and genomics businesses and announced that it would break into two parts, separating off its electronic measurement division from the rest of the business. Doing so will put the EM business up against Danaher, which makes instruments and monitoring tools for communications and enterprise networks around the world. But it will also leave Agilent freer to pursue its health-care work, posing a bigger obstacle for General Electric's GE Healthcare division as it considers which areas of the health-care industry to stress in its own growth strategies.

With the spinoff not expected to be done until late next year, Agilent will still have to make it through a tough period of sluggish revenue and earnings. If telecom spending starts to reaccelerate, though, it will be positive for the EM business. Meanwhile, the impact of health-care reform on the life sciences and other health-related divisions remains to be seen, although Agilent has continued to create new products seeking to tap the innovation potential of areas like genomics.

In the Agilent earnings report, watch to see how plans for next year's spinoff are progressing. Having gone through previous spinoffs, Agilent knows what it needs to do to execute the move well and hopefully keep the upper hand against Danaher, General Electric, and other current and prospective competitors well into the future.

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