Originally spun off from Hewlett Packard, this stock has established a strong niche in specialized testing equipment.
The company has grown through the acquisition of related businesses and invests heavily in research. Its revenue and earnings have risen steadily in the past five years. The company stands to profit from the expanding cannabis industry thanks to new equipment that will help recreational and medical growers improve the quality of their products.
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AGILENT TECHNOLOGIES INC., $70.74, (New York symbol A; Shares outstanding: 318.8 million; Market cap: $22.6 billion, www.agilent.com) makes specialized testing equipment, like mass spectrometers, for medical research laboratories and industrial clients.
In 2000, the old Hewlett-Packard set up Agilent as the owner of its testing equipment business, and then spun Agilent off—that is, handed it out to its own shareholders as a special dividend. Since then, Agilent has completed two spinoffs of its own: Verigy (in 2006), a maker of computer chip testing gear; and Keysight (in 2014), focused on products for testing electronic equipment.
Agilent’s revenue rose 2.9%, from $6.8 billion in 2013 to $7.0 billion in 2014 (fiscal year ends October 31). Earnings rose 3.4%, from $995 million to $1.03 billion; because it had fewer shares outstanding, its earnings per share rose 5.6%, from $2.88 to $3.04.
In November 2014, Agilent spun off its Keysight subsidiary and gave its shareholders one Keysight share for every two Agilent shares they held.
Due to acquisitions, Agilent’s revenue rose 10.7%, from $4.0 billion in 2015 to $4.5 billion in 2017. Earnings jumped 31.6%, from $586 million in 2015 to $768 million in 2017. Per-share earnings rose 35.6%, from $1.74 to $2.36.
In its fiscal 2018 third quarter, ended July 31, 2018, Agilent’s revenue rose 8.0%, to $1.20 billion from $1.11 billion a year earlier. Factoring out new businesses and exchange rates, revenue improved 6%.
Earnings in the quarter improved 13.6%, to $217 million, or $0.67 a share, from $191 million, or $0.59.
In addition to acquisitions of related businesses, Agilent continues to invest heavily in developing its own products. Its research costs in the quarter rose 11.5%, to $97 million (or 8.1% of revenue) from $87 million (or 7.8%) a year earlier.
Among its new products are mass spectrometers that detect and verify the active ingredients in cannabis. Those machines can also measure the composition of soil and fertilizers used to grow cannabis. That will help producers improve the quality of their products, and maximize crop yields.
The outlook for this equipment is bright, as legalization will force growers to monitor the quality of their cannabis and keep out unhealthy contaminants. As well, pharmaceutical makers and medical research labs are stepping up their studies into the effectiveness of cannabis as a treatment for pain and various diseases.
Agilent also stands to gain from ongoing sales of replenishable supplies and software updates. In the latest quarter, revenue from services rose 7.2%, and accounted for 24.6% of its total revenue.
The company should earn $2.72 a share for all of fiscal 2018. The stock trades at a high, but still reasonable, 26.0 times that estimate. The $0.596 dividend yields 0.8%.
Agilent Technologies is a buy.
Comments
Valerie
How does one go about investing if never done before
Thanks for your question. Here’s what to do after you decide on a broker/discount broker:
To show the best long-term results, Pat McKeough thinks you should stick with his three-part program:
1. Hold mostly high-quality, dividend-paying stocks.
2. Keep your portfolio well-balanced among the five economic sectors.
3. Downplay or stay out of stocks in the broker/media limelight
Pat says that there are a number of difficulties with recommending a model portfolio for all investors. The main one is that each individual has different objectives, acceptable risk levels and so on. For example, conservative or income-seeking investors may want to emphasize utilities and banks for their high and generally secure dividends. More aggressive investors might want to increase their portfolio weightings in resources or manufacturing stocks.
As well, any model portfolio would need to be continually monitored and updated as individual stocks rise and fall in value and as a percentage of the total.
In addition, different investors may be more comfortable holding a larger or smaller number of stocks, or REITS or ETFs in their portfolios. So it’s difficult to set any specific number of stocks in a model portfolio.
However, as mentioned, conservative or income-seeking investors may want to emphasize utilities and Canadian banks for their high, generally secure dividends, but you’ll still want to spread your investments out across the five main economic sectors: Manufacturing & Industry, Resources, Consumer, Finance and Utilities.
Pat’s view is that virtually all Canadian investors should have 20% to 30% of their portfolios in U.S. stocks. You could add some foreign exchange-traded funds (ETFs), such as those he recommends in Canadian Wealth Advisor, in reasonable quantities: perhaps 10% of your holdings if you are a conservative investor (including 5% or so in higher-risk funds, such as emerging-market ETFs).
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How does one go about investing if never done before
Thanks for your question. Here’s what to do after you decide on a broker/discount broker:
To show the best long-term results, Pat McKeough thinks you should stick with his three-part program:
1. Hold mostly high-quality, dividend-paying stocks.
2. Keep your portfolio well-balanced among the five economic sectors.
3. Downplay or stay out of stocks in the broker/media limelight
Pat says that there are a number of difficulties with recommending a model portfolio for all investors. The main one is that each individual has different objectives, acceptable risk levels and so on. For example, conservative or income-seeking investors may want to emphasize utilities and banks for their high and generally secure dividends. More aggressive investors might want to increase their portfolio weightings in resources or manufacturing stocks.
As well, any model portfolio would need to be continually monitored and updated as individual stocks rise and fall in value and as a percentage of the total.
In addition, different investors may be more comfortable holding a larger or smaller number of stocks, or REITS or ETFs in their portfolios. So it’s difficult to set any specific number of stocks in a model portfolio.
However, as mentioned, conservative or income-seeking investors may want to emphasize utilities and Canadian banks for their high, generally secure dividends, but you’ll still want to spread your investments out across the five main economic sectors: Manufacturing & Industry, Resources, Consumer, Finance and Utilities.
Pat’s view is that virtually all Canadian investors should have 20% to 30% of their portfolios in U.S. stocks. You could add some foreign exchange-traded funds (ETFs), such as those he recommends in Canadian Wealth Advisor, in reasonable quantities: perhaps 10% of your holdings if you are a conservative investor (including 5% or so in higher-risk funds, such as emerging-market ETFs).