NEW YORK – Agilent Technologies reported after the close of the market on Wednesday that its third quarter revenues rose 6 percent year over year, thanks largely to an 11 percent increase in revenues for its diagnostics and genomics business.
For the three months ended July 31, the firm said revenues rose to $1.27 billion from $1.20 billion in Q3 2018, beating the average Wall Street estimate of $1.24 billion. The company said core revenues also grew 6 percent in Q3.
Revenues for the diagnostics and genomics group (DGG) rose to $263.0 million from $237.0 million in the year-ago quarter, thanks to strength in the company's nucleic acid solutions division (NASD) and in the diagnostics and clinical markets.
The life sciences and applied markets group (LSAG) saw 1 percent revenue growth in Q3 to $544.0 million from $540.0 million. Demand in the pharma, environmental, and forensics markets was strong, but was offset by expected weakness in the food market.
The Agilent crosslab group (ACG) grew revenues 10 percent year over year to $467.0 million from $426.0 million with broad-based growth across all regions and markets.
"The Agilent team delivered very strong results in the third quarter, exceeding both our top and bottom-line expectations," Agilent President and CEO Mike McMullen said in a statement. "Building on this performance, we are increasing our guidance for the full year. In the quarter, we also announced the pending acquisition of BioTek, continuing our investments in high-growth markets. BioTek will significantly expand our presence in the fast-growing field of cell analysis."
In July, Agilent said that it had agreed to acquire privately held BioTek Instruments for $1.17 billion in cash.
On a call with analysts following the release of the earnings, McMullen said that the company's overall growth was driven by strength in the global pharma market in both small molecule and biopharma, and by geographic strength in the US across most end-market segments. The firm's growth in China was generally in line with its expectations.
McMullen also said that growth in Agilent's NASD business is being driven by increasing demand from customer clinical trials. In June, Agilent opened its second production facility in Frederick, Colorado, and purchased a previously leased site nearby in Boulder.
"These two facilities enable Agilent to meet the growing demand for development of RNA-based therapeutics, and continue to be a partner of choice to both pharmaceutical and biotech companies," McMullen added.
Agilent CFO Robert McMahon noted that the pharma, diagnostics and clinical, and environmental and forensics end markets drove growth for the company in Q3. Pharma grew 13 percent, with broad-based strength across instruments, services, and consumables. Agilent's biopharma business also continues to grow at double-digit rates, he added.
The environmental and forensics business grew 15 percent on a core basis in the third quarter. The strength in the forensics end market is tied to demand for expanded lab capabilities, which is related to the ongoing global opioid crisis that is driving demand for increased sample testing and broader screening requirements, McMahon said.
Core revenues for diagnostics and clinical end markets grew 7 percent during the quarter, driven by strength in the firm's pathology and genomics businesses. Chemical and energy revenues grew 1 percent. Academia and government fell 5 percent.
On a geographic basis, Agilent saw growth in all regions, led by the US, which grew at a double-digit rate, McMahon said. China grew 1 percent. Asia, outside of China, also grew at a double-digit rate, driven by growth in Japan and South Korea. Europe grew 3 percent.
McMullen noted that the BioTek acquisition is expected to strengthen Agilent's position in the cell analysis space. "Our strategic focus there began with the purchase of Seahorse Bioscience in 2015 and was followed by the acquisitions of Luxcel Biosciences and ACEA Biosciences in 2018," McMullen said. "By combining BioTek's offering with Agilent's, we will create a business with revenues that are greater than $250 million per year. This business is growing double digits today."
During Q3, Agilent also launched its new Agilent Infinity Lab LC/MSD iQ system, a single-quad mass spec built on the Ultivo LC Triple Quad core technology platform, developed specifically for chemists and chromatographers; a new Agilent 6546 LC/Q-TOF system; a new Agilent 6495 C Triple Quad LC/MS system; and a new Agilent Bravo sample prep system for metabolic analysis of human plasma samples.
In Q3, Agilent's net income fell to $191.0 million, or $.60 per share, from $236.0 million, or $.73 per share, in Q3 2018. On an adjusted basis, the firm reported earnings of $.76 per share for the quarter, beating analysts' consensus estimate of $.72 per share.
The firm's Q3 R&D costs rose 4 percent to $101.0 million from $97.0 million, while SG&A expenses for the quarter rose 7 percent to $366.0 million from $341.0 million in the prior year.
Agilent ended the quarter with $1.77 billion in cash and cash equivalents.
For fiscal year 2019, the company raised its revenue guidance to a range of $5.11 billion to $5.13 billion, and adjusted earnings to a range of $3.07 to $3.09 per share. Agilent expects Q4 revenues of $1.31 billion to $1.33 billion and adjusted earnings of $.84 to $.86 per share. Both the fiscal year and Q4 guidance exclude any impact of the pending BioTek acquisition, the company said. The acquisition is still expected to be completed in Agilent's fiscal fourth quarter.
Analysts are expecting 2019 revenues of $5.11 billion and earnings of $3.05 per share. For Q4, analysts are expecting revenues of $1.34 billion and $.87 per share in earnings.
Agilent's shares rose 9 percent to $71.54 in Thursday morning trading on the New York Stock Exchange.