NEW YORK – Agilent Technologies reported after the close of the market on Thursday that its second quarter 2020 revenue growth was flat year over year. The firm noted that core revenues, which excludes the impact of currency and acquisitions and divestitures in the past 12 months, fell about 2 percent in Q2.
For the three months ended April 30, the firm reported revenues of $1.24 billion, the same figure reported in Q2 2019 but beating Wall Street analysts' average estimate of $1.21 billion.
Revenues for the diagnostics and genomic group (DGG) rose about 4 percent to $263 million from $254.0 million in the year-ago quarter. The life sciences and applied markets group (LSAG) saw a 1 percent revenue drop in Q2 to $526 million from $529 million, as customers curtailed equipment purchases due to the COVID-19 pandemic. Agilent's CrossLab group (ACG) declined 1 percent year over year to $449 million from $455.0 million.
"Our business was tracking well into late March when we experienced significant disruption in the US and Europe as customers closed or restricted access to their facilities to slow the spread of COVID-19," Agilent President and CEO Mike McMullen said in a statement. "I believe we are well-positioned to face the challenges brought on by COVID-19 given our focus on growth, a resilient business model, a strong balance sheet, and most importantly, our outstanding team."
Agilent's ACG unit went up 1 percent on a core basis in Q2 while the DGG unit saw 5 percent core growth in Q2.
Despite COVID-19 negatively affecting Agilent's revenue growth, McMullen highlighted in a conference call following the release of earnings that the firm is support several lines of COVID-19 research and testing, along with vaccine and therapeutic development.
"We have mobilized a cross-Agilent team to maximize support to customers around the world fighting the virus," McMullen said. "The offerings range from automation, PCR, and microplate testing to consumable and components necessary for testing, as well as lab support for the customers."
On a geographic basis, China led Agilent's performance in Q2, with 4 percent core growth and increasing strength through the quarter. Meanwhile, Europe and the US saw a 4 percent and 1 drop in core revenues respectively.
In Q2, Agilent reported income of $101 million, or $.32 per share, compared to net income of $182.0 million, or $.57 per share, in Q2 2019. The firm reported adjusted earnings of $.71 per share for the quarter, beating analysts' consensus estimate of $.61 per share.
The firm's Q2 R&D costs soared nearly 99 percent to $197 million from $99 million, while SG&A expenses for the quarter inched up 1 percent to $358 million from $354 million in the prior-year Q2.
While choosing to withdraw Q3 and full-year 2020 guidance due to the unknown full impact of the COVID-19 pandemic on the global economic environment, Agilent CFO Robert McMahon noted on the call that Agilent has considered a range of possibilities as to how the company's business could unfold in Q3.
"We expect May to be very similar to April, and the business activity we've seen …. confirms that," McMahon said. "We anticipate that China will remain ahead of the curve, in terms of economic recovery, relative to the rest of the world.
In addition, Agilent expects that its pharma and services, particularly contract services, which make up the majority of the firm's service revenue, to remain resilient.
"A combination of these factors could result in our revenues being down between 5 to 15 percent on a core basis," McMahon said "On the lower end of the decline, we assume that activity in June and July will continue to improve, with the COVID-19 offerings … having a more significant impact than the 1 percent contribution than in Q2."
However, Agilent assumes there will be no significant improvement during the course of the quarter in US and Europe, that non-COVID-19 testing will not recover, and China will plateau. "While this is still a wide range, there's still significant uncertainty in the pace of recovery as the US and Europe are currently in the process of lifting restrictions," Mahon said. "We believe that Q3 will be the toughest part of our fiscal year, as the world works through reopening the economy."
Agilent ended the quarter with $1.32 billion in cash and cash equivalents.
In Friday morning trading on the New York Stock Exchange, Agilent's shares were up 8 percent at $87.23.