BTIG Thinks Agilent's Transformation Is In The Early Innings

Agilent reported third-quarter adjusted EPS of $0.49, which was $0.02 above consensus estimate of $0.47 and above the high end of guidance of $0.45–$0.47. Revenue of $1.044 billion was essentially in line with consensus' $1.05 billion and within the guidance range of $1.03 billion–$1.05 billion.

Despite this outperformance, the company left its F16 core revenue growth and adjusted operating margin guidance unchanged, citing increased level of uncertainty among EU customers. This implies only +1.2 percent core revenue growth (versus consensus' +3.5 percent) and about 50 bp decline in operating margin in the fourth quarter after six consecutive quarters of operating margin expansion.

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Agilent expects fourth-quarter 2016 revenue in the range of $1.05 billion to $1.07 billion. Fourth-quarter non-GAAP earnings are expected to be in the range of $0.50 to $0.52 per share. The company's estimates fell short of Street mean of $0.54 EPS on revenue of $1.09 billion.

For fiscal year 2016, Agilent expects revenue of $4.14 billion to $4.16 billion and non-GAAP earnings of $1.89 to $1.91 per share. Analysts expect EPS of $1.91 on revenue of $4.18 billion.

"All told, while we understand mgmt's conservative strategy to setting guidance given recent macro concerns, we remain confident in our projections of 5 percent core revenue growth for F16 and continue to model F16 operating margins above the midpoint of guidance," analyst Karen Koski wrote in a note.

The analyst's F16 projection remains steady at $1.92, which is $0.01 above the top end of guidance of $1.89–$1.91. Koski has a price target of $55.

Shares of Agilent closed Wednesday's regular trading at $46.30. At time of writing Thursday, Agilent was down 4.25 percent at $46.38.

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