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Agilent Q2 Revenues Rise 9 Percent

NEW YORK (GenomeWeb) – Agilent Technologies reported after the close of the market on Monday that its second quarter revenues rose 9 percent year over year, thanks to growth across all of its business units.

For the three months ended April 30, the life sciences company said total revenues rose to $1.21 billion from $1.10 billion in Q2 2017, in line with analysts' average estimate.

Revenues from the crosslab group rose 13 percent to $426.0 million from $378.0 million the previous year; diagnostics and genomics revenues rose 9 percent to $219.0 million from $201.0 million; and revenues from the firm's life science and applied markets group rose 7 percent to $561.0 million from $523.0 million in the prior-year period.

Agilent said that strength in mass spectrometry and cell analysis led the results in the life science and applied markets group, growth was strong in services and consumables in the crosslab segment, and and an uptick in genomics led revenue growth in the diagnostics and genomics business.

"Again this quarter, we delivered significant earnings and cash flow growth on strong top-line results, contributing to an excellent first half of 2018. We saw strength in the pharma and chemical and energy markets with 8 percent and 5 percent growth this quarter, respectively," Agilent CEO and President Mike McMullen said in a statement. "On the innovation front, we are seeing strong momentum in our newly released products and are continuing to introduce highly differentiated solutions to help our customers advance their work."

On a conference call with analysts following the release of the earnings, McMullen said Lunar New Year had a material impact on the timing of the firm's reported revenues in the first half of the year — in Q1, customers in China requested deliveries earlier than anticipated which pulled in approximately $10 million of revenues from Q2 into Q1, he said. McMullen also noted that Lunar New Year reduced the number of selling days in Q2, negatively affecting Agilent's crosslab annuity business by close to $10 million. "These two factors reduced Q2's reported company growth by 2 percentage points," he added.

In addition to growth in the pharma and chemical and energy markets that McMullen had noted in his statement, he said on the call that the firm also saw a "slight pause among our US [chemical and energy] customer base, which may be attributable to some concerns about trade policies."

He also said that Agilent's academia and government business grew 2 percent, driven primarily by strength in LC/MS, cell analysis, and its crosslab services and consumables business. Diagnostics and clinical grew 3 percent, led by strength Agilent's reagent partnership and genomics business, offsetting continued weakness in the US pain management market.

McMullen also noted that food revenues fell 1 percent, reflecting the initial impact of the Chinese government's reorganization its food safety ministries. "On March 21, the Chinese government announced the creation of the National Market Supervision Administration, NMSA, consolidating many previously independent agencies, such as AQSIQ, SFDA, and SAIC into one market supervisory agency," he said. "This has resulted in a temporary slowing of new instrument purchases as ministries are being consolidated and decision makers are being clarified. We expect the reorganization will take as long as one year to be completely finished, with expected slowdown of six to nine months in new instrument purchases."

The environmental and forensics business grew 2 percent, he added.

The company saw high single-digit growth in the Americas and Europe during Q2, and China was flat  due to the Lunar New Year and the recently announced changes to government ministries, McMullen said.

The firm's Q2 net income rose to $205.0 million, or $.63 per share, from $164.0 million, or $.50 per share, a year earlier. On an adjusted basis, Agilent reported EPS of $.65, beating the Wall Street estimate of $.64 per share.

Agilent's R&D expenses for the quarter rose 8 percent to $91.0 million from $84.0 million in Q2 2017, and its SG&A costs rose 10 percent to $338.0 million from $307.0 million in the prior-year quarter.

The company ended the quarter with $3.01 billion in cash and cash equivalents.

For Q3, Agilent expects revenues of $1.19 billion to $1.21 billion and adjusted EPS of $.61 to $.63. Analysts are expecting Q3 revenues of $1.21 billion and EPS of $.65. For full-year 2018, Agilent is expecting revenues of $4.85 billion to $4.87 billion and adjusted EPS of $2.63 to $2.67. Analysts are expecting 2018 revenues of $4.92 billion and EPS of $2.70.

Agilent's shares fell more than 8 percent to $63.57 in Tuesday morning trading on the New York Stock Exchange.

In a note to investors on Tuesday, Cowen analyst Doug Schenkel upgraded Agilent's shares to Outperform from Market Perform, writing that the sell-off in the shares presents a buying opportunity. "While Q2 wasn't an exciting quarter, we don't think the underlying outlook or thesis has changed, and continue to believe Agilent will grow revenue/EPS above peers for the foreseeable future (and likely exceed revised guidance)," he said. "At ~$63, the stock is trading at a 5 percent to 10 percent EBITDA discount. We'd be buyers."