NEW YORK (GenomeWeb News) – Fitch Ratings today upgraded several ratings for Agilent Technologies, including its issuer default rating to BBB+ from BBB.
In addition, Fitch upgraded the Santa Clara, Calif.-based life sciences, electronics measurement, and semiconductor firm's senior unsecured revolving credit facility and senior secured notes to BBB+ from BBB.
The changes affect about $2.4 billion of debt, including $330 million in its revolving credit facility set to expire in 2012. Fitch said that Agilent's rating outlook is stable.
The higher ratings, Fitch said, reflect its view that Agilent's operating profile has strengthened. The ratings agency cited Agilent's purchase of Varian, which increased its mix of sales to the bio-analytical markets. As a result, the increasing end market and geographical diversification should reduce operating volatility. Fitch added that Agilent's restructuring of its Electronic Measurement Group improves operating profitability.
It said that Agilent's annual free cash flow will approach $1 billion over the intermediate range and be in the $500 million to $1 billion range through the business cycle. In fiscal 2010 Agilent's free cash flow exceeded Fitch's expectations and free-cash flow margins last year returned to levels posted by Agilent before the economic downturn of about 11 percent. Free-cash flow margins had retreated to 6 percent in fiscal 2009 and 10 percent in fiscal 2008.
Fitch also noted Agilent's continued conservative approach to debt levels and share buybacks, saying the company intends to limit repurchases in order to offset dilutions from shares issued as stock-based compensation. It also intends to keep cash levels at more than $1 billion. Agilent has mid-cycle annual free cash flow of more than $1 billion, and is committed to reducing its debt, Fitch added.