Seeking Alpha: Challenges Abound, But Overlooked Microsemi Should Be Ready To Deliver

Small-cap chip company Microsemi (MSCC) gets a lot of flak for what it is (highly exposed to defense) and what it isn't (a fast-growing mobile device story), but the fact remains that this company has grown revenue at a 20% compounded average rate over the past decade. What's more, the company is offering a rare combo - a good legacy business where competition faces an uphill battle, coupled with organic growth opportunities in growth markets and positive margin leverage.

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Challenges Abound, But Overlooked Microsemi Should Be Ready To Deliver

Investopedia: Agilent Beaten Down To Bargain

You would think that a company with a global revenue base, diverse industry exposure and solid returns on capital would get the benefit of the doubt. But in the case of Agilent (NYSE:A), you would seem to be wrong. Agilent may not command as much respect for technology leadership as a company like Illumina (Nasdaq:ILMN), but Agilent's diverse and growing business deserves more respect and investors should consider using this market pullback as a chance to buy some shares in this high-quality company.


Third Quarter Results Better than Feared
Even though there was not much sign of it in the published analyst estimates, sentiment had definitely been souring on Agilent going into this earnings cycle. Nevertheless, Agilent reported that sales grew more than 22% in the fiscal third quarter, with 19% organic revenue growth. Growth was led by the electronic measurement segment (up almost 24%), where growth in the communications business was especially strong. Life sciences delivered solid 21% growth (18% organic), and chemical analysis was the "laggard" with 16% reported and 11% organic revenue growth.


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Investopedia: Is Tech Sending A Gloomy Message?

It does not seem to matter what metric anybody looks at - the economy is in a worrisome state. Rail traffic has softened, payroll reports have been weak, wages are stagnant and confidence is flagging at both the consumer and corporate level. Adding injury to insult, a small host of companies in the technology sector have pre-announced disturbingly poor results. Although the stock market is infamous for predicting disasters that never come, investors may want to pause and contemplate whether recent data suggest a more conservative outlook is in order.


Chips in a Dip
It is hardly controversial to say that semiconductors, as a sector, have been relatively weak this year. While the sector has lagged the market as a whole, notable outperformers like Qualcomm (Nasdaq:QCOM) and Intel (Nasdaq:INTC) have made the numbers look even better than they are.


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Investopedia: Agilent Overshoots

It really was not so long ago that electronic measurement, chemical analysis and life sciences conglomerate Agilent (NYSE:A), was overlooked, under-followed and trading at a discount to its intrinsic worth. The market is always changing, though, and Agilent now trades much more like a popular growth company with multiple revenue drivers.


A Strong Second Quarter
Inherent to the Agilent structure is the idea that the more stable life sciences group can offset the more cyclical electronic measurement business. Right now, though, both are doing quite well. Total revenue rose 32% in the second quarter, or 21% on an organic basis. Growth was led by the chemical analysis growth, with a 60% jump in reported revenue, though life sciences and electronic measurement did fine at 39% and 19%, respectively. Order growth of more than 26% (18% organic) was also encouraging, though this number seems to be decelerating.

Gross margin did decline on a year-over-year basis (55.4% versus 56.9%), one of the few blemishes of the quarter. Operating income, though, grew more than 61% and the operating margin jumped three and a half points on controlled SG&A and R&D spending. Agilent still spent close to 10% of its revenue on R&D, though, so it is not as though Agilent is robbing the future for present growth.


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