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Evercore, Barclays Downgrade Agilent Shares

NEW YORK – Evercore ISI and Barclays on Monday downgraded Agilent Technologies' shares, with Evercore lowering its rating to In-Line from Outperform and Barclays downgrading its rating to Underweight from Equal Weight.

Both firms said the rating changes were related to lowered spending in biopharma industries and an economic slowdown in China. Evercore set a target price of $124 per share, down from $126 per share. Barclays set a target price of $115 per share, down from $130 per share.

Barclays had initiated coverage of Agilent in May at an Equal Weight rating on its stock and a price target of $140.

Evercore analyst Vijay Kumar wrote in a report that Agilent could face incremental revenue cuts due to the slowdown in China's economy and weak biopharma industry spending. However, he noted that stimulus spending in China and flush year-end budgets in biopharma could reduce those risks.

Barclays analyst Luke Sergott separately wrote that the investment bank sees falling instrument demand in the sector, a trend that potentially could accelerate through the end of the year. He noted that Thermo Fisher Scientific reported earlier in the month that its second quarter orders were softer than expected, especially in China, and that instrument sales were likely to slow in the second half of the year. Danaher similarly reported biotech and pharma instrument sales had softened and biotech firms had been more cautious about spending in Q2.

Sergott said that because the deceleration is occurring on the heels of a major instrument growth cycle and it coincides with a pause in biopharma spending, "we see risk that the duration of the trough and magnitude could be much longer and deeper than expected." He also noted that companies in the chemistry space have been issuing profit warnings, signaling risk to Agilent's chemical and advanced materials business.

"To be clear, Agilent is still a very attractive business long term and management is very capable with an impressive track record," he wrote. "We just choose to move our relative ratings to underweight due to near-to-medium-term risks over the course of the next nine-12 months."

Agilent's share price was down about 2 percent, to $123.59, in early morning trading on the New York Stock Exchange.