In a report published Monday, Morgan Stanley analyst Daniel Brennan reiterated Overweight on Agilent Technologies A, raising its price target from $60.00 to $65.00.
According to the report, the price target raise is based upon the analysts sum of the parts analysis, which assumes the ‘life sciences' segment trades in-line with peer WAT (previously assumed 10% discount) while the T&M segment trades at a 10% premium to peers. A remains one of their top picks for 2014.
“A is one of the most economically sensitive stocks under coverage, driven primarily by the T&M segment,” the report said. “While F13 was challenging for T&M (-11% organic growth, though -8% excl. one large contract headwind), F14 is expected to show significant improvement, with guidance calling for 3% growth. With the roll off from the comp base of the large wireless contract combined with the impact of improving PMIs and GDP, EMG upside is a realistic possibility (after a string of quarterly shortfalls).”
Some risks to A included:
-Further WW economic contraction, particular in China.
-EMG contraction, given EMG is close to ~45% of total revenues.
-Failure to execute spin-off as planned: whether timing, tax rate creep, or other unforeseen execution issues.
A closed on Friday at $57.30.
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