Agilent Hedges Against Cyclicality by Embracing Bioanalytics

October 27, 2011

The bioanalytical measurement segment of Agilent Technologies (A) outperformed the electronic measurement business, with profits growing faster and revenue declining slower, making the fairly nascent sector a new focus for the $13 billion conglomerate, says William Stein, CFA, an Analyst for Credit Suisse Group.

“In fiscal 2009, which was the recession year, the bioanalytic segments, life sciences group and chemical analysis group, revenue declined by 6% and operating profit margin increased by 20 basis points. Compare that to the electronic measurement business, where revenue declined by over 32% and the operating margin went from 13.4% to zero,” Stein said.

Stein has an “outperform” rating on Agilent. He says the company can become a market leader in bioanalytical measurement, and the purchase of Varian contributes to making the business less cyclical and less economically sensitive, and the company’s experience and overall size give it an edge over the competition.

“The bioanalytic measurement industry is significantly evolving,” Stein said. “Competition is less intense than it is in the electronic test business, and Agilent is a somewhat smaller player in that business. So the company’s opportunity to grow sales and profits in the bioanalytic market are much more robust than they are in the electronic test business.”