Investopedia: Agilent Goes Three For Three

It is interesting to see that however sophisticated the markets get (or market participants think they are), there are still plenty of oddities. For a decent stretch of time, Agilent (NYSE:A) was undervalued. Then it began moving on no particular news and not only made up the valuation gap but perhaps overshot it a bit. Individual investors can look at this in one of two ways: Take heart from the fact that the "professionals" leave plenty of fat opportunities on the table for retail investors, or despair that the market is less about finding and assessing value and more like a casino full of hyperactive traders with attention deficits. 

The Quarter That Was
Agilent reported a very solid beginning to its fiscal year. While revenue was a bit light relative to expectations, that seems to be solely a byproduct of some revenue recognition adjustments tied to the acquisition of Varian. All in all, revenue rose more than 25% from last year (though down 4% sequentially). Organic growth was led by measurement and test business (up 31%), with both chemical analysis and life sciences chipping in high single-digit growth as well.

Profitability was a little bit of good and bad news, more heavily weighted toward "good". Gross margin slipped almost a point from last year, but moderate growth in SG&A and R&D spending allowed the company to deliver nearly three full points of operating margin improvement. Although gross margin is important, there is still a "settling in" process going on with the company's acquisitions and divestitures, so this quarter's decline really does not seem like anything to worry about at this point. (For more, see R&D Spending An Profitability: What's The Link?)


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