Intrinsic value of Agilent Technologies - A

Previous Close

$67.25

  Intrinsic Value

$61.53

stock screener

  Rating & Target

hold

-9%

Previous close

$67.25

 
Intrinsic value

$61.53

 
Up/down potential

-9%

 
Rating

hold

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of A stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 21.6

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  4.06
  6.70
  6.53
  6.38
  6.24
  6.12
  6.00
  5.90
  5.81
  5.73
  5.66
  5.59
  5.53
  5.48
  5.43
  5.39
  5.35
  5.32
  5.28
  5.26
  5.23
  5.21
  5.19
  5.17
  5.15
  5.14
  5.12
  5.11
  5.10
  5.09
  5.08
Revenue, $m
  4,202
  4,484
  4,776
  5,081
  5,398
  5,728
  6,072
  6,430
  6,804
  7,194
  7,601
  8,026
  8,471
  8,935
  9,420
  9,928
  10,459
  11,015
  11,597
  12,206
  12,844
  13,513
  14,214
  14,948
  15,718
  16,526
  17,372
  18,260
  19,191
  20,167
  21,192
Variable operating expenses, $m
 
  1,925
  2,034
  2,147
  2,266
  2,389
  2,517
  2,651
  2,790
  2,936
  3,088
  2,995
  3,160
  3,334
  3,515
  3,704
  3,902
  4,110
  4,327
  4,554
  4,792
  5,042
  5,303
  5,577
  5,865
  6,166
  6,482
  6,813
  7,160
  7,524
  7,907
Fixed operating expenses, $m
 
  1,857
  1,904
  1,951
  2,000
  2,050
  2,101
  2,154
  2,208
  2,263
  2,320
  2,378
  2,437
  2,498
  2,560
  2,624
  2,690
  2,757
  2,826
  2,897
  2,969
  3,043
  3,119
  3,197
  3,277
  3,359
  3,443
  3,529
  3,618
  3,708
  3,801
Total operating expenses, $m
  3,587
  3,782
  3,938
  4,098
  4,266
  4,439
  4,618
  4,805
  4,998
  5,199
  5,408
  5,373
  5,597
  5,832
  6,075
  6,328
  6,592
  6,867
  7,153
  7,451
  7,761
  8,085
  8,422
  8,774
  9,142
  9,525
  9,925
  10,342
  10,778
  11,232
  11,708
Operating income, $m
  615
  702
  839
  982
  1,132
  1,289
  1,453
  1,626
  1,806
  1,995
  2,194
  2,654
  2,873
  3,103
  3,345
  3,599
  3,867
  4,148
  4,444
  4,755
  5,083
  5,428
  5,791
  6,174
  6,576
  7,001
  7,447
  7,918
  8,413
  8,935
  9,484
EBITDA, $m
  861
  1,014
  1,155
  1,302
  1,456
  1,618
  1,787
  1,964
  2,149
  2,344
  2,548
  2,762
  2,987
  3,223
  3,471
  3,732
  4,007
  4,296
  4,599
  4,919
  5,255
  5,609
  5,982
  6,374
  6,787
  7,222
  7,680
  8,163
  8,670
  9,205
  9,769
Interest expense (income), $m
  73
  78
  88
  98
  109
  120
  131
  143
  155
  168
  182
  196
  211
  226
  242
  259
  277
  295
  314
  334
  356
  378
  401
  425
  451
  477
  505
  535
  565
  598
  631
Earnings before tax, $m
  544
  624
  751
  884
  1,024
  1,170
  1,322
  1,483
  1,651
  1,827
  2,012
  2,458
  2,663
  2,877
  3,103
  3,340
  3,590
  3,853
  4,130
  4,421
  4,727
  5,050
  5,390
  5,749
  6,126
  6,523
  6,942
  7,383
  7,848
  8,337
  8,853
Tax expense, $m
  82
  168
  203
  239
  276
  316
  357
  400
  446
  493
  543
  664
  719
  777
  838
  902
  969
  1,040
  1,115
  1,194
  1,276
  1,364
  1,455
  1,552
  1,654
  1,761
  1,874
  1,993
  2,119
  2,251
  2,390
Net income, $m
  462
  455
  548
  645
  747
  854
  965
  1,082
  1,205
  1,334
  1,469
  1,795
  1,944
  2,100
  2,265
  2,438
  2,621
  2,813
  3,015
  3,227
  3,451
  3,687
  3,935
  4,196
  4,472
  4,762
  5,068
  5,390
  5,729
  6,086
  6,463

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  2,289
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  7,794
  5,876
  6,260
  6,659
  7,075
  7,507
  7,958
  8,428
  8,918
  9,429
  9,962
  10,519
  11,102
  11,710
  12,346
  13,011
  13,707
  14,436
  15,199
  15,998
  16,834
  17,711
  18,629
  19,592
  20,601
  21,659
  22,768
  23,932
  25,152
  26,432
  27,775
Adjusted assets (=assets-cash), $m
  5,505
  5,876
  6,260
  6,659
  7,075
  7,507
  7,958
  8,428
  8,918
  9,429
  9,962
  10,519
  11,102
  11,710
  12,346
  13,011
  13,707
  14,436
  15,199
  15,998
  16,834
  17,711
  18,629
  19,592
  20,601
  21,659
  22,768
  23,932
  25,152
  26,432
  27,775
Revenue / Adjusted assets
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
Average production assets, $m
  729
  776
  826
  879
  934
  991
  1,050
  1,112
  1,177
  1,245
  1,315
  1,389
  1,465
  1,546
  1,630
  1,717
  1,809
  1,906
  2,006
  2,112
  2,222
  2,338
  2,459
  2,586
  2,719
  2,859
  3,005
  3,159
  3,320
  3,489
  3,666
Working capital, $m
  2,690
  426
  454
  483
  513
  544
  577
  611
  646
  683
  722
  763
  805
  849
  895
  943
  994
  1,046
  1,102
  1,160
  1,220
  1,284
  1,350
  1,420
  1,493
  1,570
  1,650
  1,735
  1,823
  1,916
  2,013
Total debt, $m
  1,904
  2,143
  2,391
  2,648
  2,916
  3,195
  3,486
  3,789
  4,105
  4,435
  4,779
  5,138
  5,514
  5,906
  6,316
  6,745
  7,194
  7,664
  8,156
  8,671
  9,211
  9,776
  10,369
  10,990
  11,641
  12,323
  13,038
  13,789
  14,576
  15,402
  16,268
Total liabilities, $m
  3,551
  3,790
  4,038
  4,295
  4,563
  4,842
  5,133
  5,436
  5,752
  6,082
  6,426
  6,785
  7,161
  7,553
  7,963
  8,392
  8,841
  9,311
  9,803
  10,318
  10,858
  11,423
  12,016
  12,637
  13,288
  13,970
  14,685
  15,436
  16,223
  17,049
  17,915
Total equity, $m
  4,243
  2,086
  2,222
  2,364
  2,511
  2,665
  2,825
  2,992
  3,166
  3,347
  3,537
  3,734
  3,941
  4,157
  4,383
  4,619
  4,866
  5,125
  5,396
  5,679
  5,976
  6,287
  6,613
  6,955
  7,313
  7,689
  8,083
  8,496
  8,929
  9,383
  9,860
Total liabilities and equity, $m
  7,794
  5,876
  6,260
  6,659
  7,074
  7,507
  7,958
  8,428
  8,918
  9,429
  9,963
  10,519
  11,102
  11,710
  12,346
  13,011
  13,707
  14,436
  15,199
  15,997
  16,834
  17,710
  18,629
  19,592
  20,601
  21,659
  22,768
  23,932
  25,152
  26,432
  27,775
Debt-to-equity ratio
  0.449
  1.030
  1.080
  1.120
  1.160
  1.200
  1.230
  1.270
  1.300
  1.320
  1.350
  1.380
  1.400
  1.420
  1.440
  1.460
  1.480
  1.500
  1.510
  1.530
  1.540
  1.550
  1.570
  1.580
  1.590
  1.600
  1.610
  1.620
  1.630
  1.640
  1.650
Adjusted equity ratio
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  462
  455
  548
  645
  747
  854
  965
  1,082
  1,205
  1,334
  1,469
  1,795
  1,944
  2,100
  2,265
  2,438
  2,621
  2,813
  3,015
  3,227
  3,451
  3,687
  3,935
  4,196
  4,472
  4,762
  5,068
  5,390
  5,729
  6,086
  6,463
Depreciation, amort., depletion, $m
  246
  312
  316
  320
  324
  329
  333
  338
  343
  348
  354
  108
  114
  120
  126
  133
  140
  148
  156
  164
  172
  181
  191
  200
  211
  222
  233
  245
  257
  270
  284
Funds from operations, $m
  753
  767
  864
  965
  1,071
  1,182
  1,298
  1,420
  1,548
  1,682
  1,823
  1,902
  2,057
  2,220
  2,392
  2,572
  2,761
  2,960
  3,170
  3,391
  3,623
  3,868
  4,126
  4,397
  4,683
  4,984
  5,301
  5,635
  5,986
  6,357
  6,747
Change in working capital, $m
  -40
  27
  28
  29
  30
  31
  33
  34
  36
  37
  39
  40
  42
  44
  46
  48
  50
  53
  55
  58
  61
  64
  67
  70
  73
  77
  80
  84
  88
  93
  97
Cash from operations, $m
  793
  740
  836
  936
  1,041
  1,151
  1,266
  1,386
  1,512
  1,645
  1,784
  1,862
  2,015
  2,176
  2,345
  2,523
  2,711
  2,908
  3,115
  3,333
  3,563
  3,804
  4,059
  4,327
  4,610
  4,907
  5,220
  5,550
  5,898
  6,264
  6,650
Maintenance CAPEX, $m
  0
  -56
  -60
  -64
  -68
  -72
  -77
  -81
  -86
  -91
  -96
  -102
  -108
  -114
  -120
  -126
  -133
  -140
  -148
  -156
  -164
  -172
  -181
  -191
  -200
  -211
  -222
  -233
  -245
  -257
  -270
New CAPEX, $m
  -139
  -47
  -51
  -53
  -55
  -57
  -59
  -62
  -65
  -67
  -70
  -74
  -77
  -80
  -84
  -88
  -92
  -96
  -101
  -105
  -110
  -116
  -121
  -127
  -133
  -140
  -146
  -154
  -161
  -169
  -177
Cash from investing activities, $m
  -238
  -103
  -111
  -117
  -123
  -129
  -136
  -143
  -151
  -158
  -166
  -176
  -185
  -194
  -204
  -214
  -225
  -236
  -249
  -261
  -274
  -288
  -302
  -318
  -333
  -351
  -368
  -387
  -406
  -426
  -447
Free cash flow, $m
  555
  637
  725
  820
  918
  1,021
  1,130
  1,243
  1,362
  1,486
  1,617
  1,686
  1,831
  1,982
  2,142
  2,309
  2,486
  2,671
  2,866
  3,072
  3,289
  3,517
  3,757
  4,009
  4,276
  4,557
  4,852
  5,164
  5,492
  5,838
  6,202
Issuance/(repayment) of debt, $m
  262
  239
  247
  257
  268
  279
  291
  303
  316
  330
  344
  359
  375
  392
  410
  429
  449
  470
  492
  515
  540
  565
  592
  621
  651
  682
  716
  750
  787
  826
  866
Issuance/(repurchase) of shares, $m
  -372
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  -118
  239
  247
  257
  268
  279
  291
  303
  316
  330
  344
  359
  375
  392
  410
  429
  449
  470
  492
  515
  540
  565
  592
  621
  651
  682
  716
  750
  787
  826
  866
Total cash flow (excl. dividends), $m
  436
  876
  973
  1,077
  1,186
  1,300
  1,420
  1,546
  1,678
  1,816
  1,961
  2,046
  2,206
  2,375
  2,552
  2,738
  2,935
  3,141
  3,358
  3,587
  3,828
  4,082
  4,349
  4,630
  4,927
  5,239
  5,568
  5,914
  6,279
  6,663
  7,068
Retained Cash Flow (-), $m
  -76
  -132
  -136
  -142
  -147
  -154
  -160
  -167
  -174
  -181
  -189
  -198
  -207
  -216
  -226
  -236
  -247
  -259
  -271
  -284
  -297
  -311
  -326
  -342
  -358
  -376
  -394
  -413
  -433
  -454
  -477
Prev. year cash balance distribution, $m
 
  2,289
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  3,033
  837
  935
  1,039
  1,147
  1,260
  1,379
  1,504
  1,634
  1,772
  1,848
  1,999
  2,159
  2,326
  2,502
  2,687
  2,882
  3,088
  3,304
  3,531
  3,771
  4,023
  4,289
  4,569
  4,863
  5,174
  5,501
  5,846
  6,209
  6,591
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  2,908
  766
  814
  855
  889
  915
  932
  940
  939
  929
  878
  853
  821
  781
  735
  683
  627
  569
  509
  449
  390
  334
  281
  233
  189
  151
  118
  90
  68
  50
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Agilent Technologies, Inc. provides application focused solutions that include instruments, software, services and consumables for the entire laboratory workflow. The Company serves the life sciences, diagnostics and applied chemical markets. It has three business segments: life sciences and applied markets business, diagnostics and genomics business, and Agilent CrossLab business. Its life sciences and applied markets business segment offers instruments and software that enable customers to identify, quantify and analyze the physical and biological properties of substances and products, as well as enable customers in the clinical and life sciences research areas to interrogate samples at the molecular level. Its diagnostics and genomics business segment includes the reagent partnership, pathology, companion diagnostics, genomics and the nucleic acid solutions businesses. Its Agilent CrossLab business segment spans the entire lab with its consumables and services portfolio.

FINANCIAL RATIOS  of  Agilent Technologies (A)

Valuation Ratios
P/E Ratio 47.2
Price to Sales 5.2
Price to Book 5.1
Price to Tangible Book
Price to Cash Flow 27.5
Price to Free Cash Flow 33.3
Growth Rates
Sales Growth Rate 4.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 41.8%
Cap. Spend. - 3 Yr. Gr. Rate -6.5%
Financial Strength
Quick Ratio NaN
Current Ratio 0.2
LT Debt to Equity 44.9%
Total Debt to Equity 44.9%
Interest Coverage 8
Management Effectiveness
Return On Assets 6.9%
Ret/ On Assets - 3 Yr. Avg. 5.7%
Return On Total Capital 7.7%
Ret/ On T. Cap. - 3 Yr. Avg. 7.1%
Return On Equity 11%
Return On Equity - 3 Yr. Avg. 9.9%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 52.3%
Gross Margin - 3 Yr. Avg. 50.5%
EBITDA Margin 20.5%
EBITDA Margin - 3 Yr. Avg. 18.5%
Operating Margin 14.6%
Oper. Margin - 3 Yr. Avg. 12.6%
Pre-Tax Margin 12.9%
Pre-Tax Margin - 3 Yr. Avg. 10.2%
Net Profit Margin 11%
Net Profit Margin - 3 Yr. Avg. 11.5%
Effective Tax Rate 15.1%
Eff/ Tax Rate - 3 Yr. Avg. 7.5%
Payout Ratio 32.5%

A stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the A stock intrinsic value calculation we used $4202 million for the last fiscal year's total revenue generated by Agilent Technologies. The default revenue input number comes from 2016 income statement of Agilent Technologies. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our A stock valuation model: a) initial revenue growth rate of 6.7% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for A is calculated based on our internal credit rating of Agilent Technologies, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Agilent Technologies.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of A stock the variable cost ratio is equal to 43.3%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $1812 million in the base year in the intrinsic value calculation for A stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 4.1% for Agilent Technologies.

Corporate tax rate of 27% is the nominal tax rate for Agilent Technologies. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the A stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for A are equal to 17.3%.

Life of production assets of 12.9 years is the average useful life of capital assets used in Agilent Technologies operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for A is equal to 9.5%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $4243 million for Agilent Technologies - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 321.784 million for Agilent Technologies is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Agilent Technologies at the current share price and the inputted number of shares is $21.6 billion.

Management's discussion and analysis

Agilent Technologies Inc. ("we", "Agilent" or the "company"), incorporated in Delaware in May 1999, is a global leader in life sciences, diagnostics and applied chemical markets, providing application focused solutions that includes instruments, software, services and consumables for the entire laboratory workflow.

In November 2015, we completed the acquisition of Seahorse Bioscience ("Seahorse"), a leader in providing instruments and assay kits for measuring cell metabolism and bioenergetics for $242 million in cash. Seahorse's technology enables researchers to better understand cell health, function and signaling, and how the cell may be impacted by the introduction of a specific drug, by providing real-time kinetics to unlock essential cellular bioenergetics data. The financial results of Seahorse have been included within Agilent's consolidated financial statements from November 1, 2015.

On March 2, 2016, Agilent made a preferred stock investment in Lasergen for $80 million. Agilent’s initial ownership stake was 48 percent and we have also joined the board of Lasergen and signed a collaboration agreement. We have the option to acquire all of the remaining shares of Lasergen until March 2, 2018, for additional consideration of $105 million. Lasergen is a Variable Interest Entity (“VIE”), however, we do not consolidate the entity in our financial statements because we do not have the power to direct the activities of the VIE that most significantly impact the VIE's economic performance nor are we the primary beneficiary. Because of the nature of the preferred stock of Lasergen that we own, we account for this investment under the cost method.

On August 1, 2016 we completed the acquisition of substantially all of the assets of iLab Solutions LLC ("iLab"), a cloud-based solutions provider for core laboratory management.  iLab's offerings enables customers to easily and accurately book time in shared facilities, to bill and invoice for projects, to manage studies, to generate reports and business intelligence, and to schedule instrument reservations across multiple projects. The purchase price was $26 million in cash. The financial results of iLab have been included within Agilent's consolidated financial statements from August 1, 2016.

Agilent's net revenue of $4,202 million in 2016 increased 4 percent when compared to 2015. Foreign currency movements for 2016 had an unfavorable impact of approximately 2 percentage points compared to 2015. Agilent's net revenue of $4,038 million was flat in 2015 when compared to 2014.

The life sciences and applied markets business brings together Agilent's analytical laboratory instrumentation and informatics. Revenue increased 1 percent in 2016 when compared to 2015. Foreign currency movements had an unfavorable impact of approximately 2 percentage points in 2016 when compared to 2015. For the year ended October 31, 2016 and excluding the impact of foreign currency movements, acquisitions and the NMR business our performance within the life sciences market continued to show strong revenue growth from the pharmaceutical and biotechnology markets. Within the applied markets, and excluding the impact of foreign currency movements and the NMR business, there was strong growth in both the environmental and food markets, but revenue from sales to other applied markets was weak with a decline in revenue from sales to the chemical and energy markets. Revenue decreased 2 percent in 2015 when compared to 2014. For the year ended October 31, 2015 and 

excluding the impact of currency movements and the NMR business, our performance within the life sciences business showed consistent revenue growth from sales to the pharmaceutical and biotechnology market partially offset by a decrease in the revenue generated from sales to the life sciences research market. Within applied markets and excluding the impact of currency movements and the NMR business, there was weakness in the chemical and energy markets in the year ended October 31, 2015 when compared to the prior year.

The diagnostics and genomics business includes genomics, nucleic acid contract manufacturing and the pathology, companion diagnostics and reagent partnership businesses. Revenue increased 7 percent in 2016 when compared to 2015. Foreign currency movements had an unfavorable impact of approximately 1 percentage points in 2016 when compared to 2015. Excluding the impact of foreign currency movements and acquisitions, growth in revenue from sales to the diagnostics and clinical markets continued to be strong, led by our companion diagnostics and genomics businesses in the year ended October 31, 2016 when compared to the prior year. Revenue was flat in 2015 when compared to 2014. Excluding foreign currency movements, our growth in revenue from sales to the diagnostics and clinical markets was strong in the year ended October 31, 2015 when compared to the prior year.

The Agilent CrossLab business combines our analytical laboratory services and consumables business. Revenue increased 7 percent in 2016 when compared to 2015. Foreign currency movements had an unfavorable impact of approximately 2 percentage points in 2016 when compared to 2015. Excluding the impact of foreign currency movements and acquisitions, there was growth in sales to all key markets. The pharmaceutical and biotechnology markets led all the markets in revenue and revenue growth along with very strong revenue growth from the food markets. In addition, we saw moderate growth from the environmental market and modest revenue growth from the chemical and energy markets. Revenue increased 2 percent in 2015 when compared to 2014. Excluding the impact of foreign currency movements there was growth in sales to all key end markets, in particular, the pharmaceutical and biotechnology market in the year ended October 31, 2015 when compared to the prior year. Within the applied markets revenue in chemical and energy end markets were slower but still reported growth when adjusted for currency movements.

Net income from continuing operations was $462 million in 2016 compared to net income from continuing operations of $438 million and $232 millionin 2015 and 2014, respectively. As of October 31, 2016 and 2015 we had cash and cash equivalents balances of $2,289 million and $2,003 million, respectively.

On November 22, 2013 we announced that our board of directors had authorized a share repurchase program. The existing program is designed to reduce or eliminate dilution resulting from issuance of stock under the company's employee equity incentive programs to target maintaining a weighted average share count of approximately 335 million diluted shares. For the years ended October 31, 2016, 2015 and 2014 we repurchased 2.4 million shares for $98 million, 6 million shares for $267 million and 4 million shares for $200 million, respectively. All such shares and related costs are held as treasury stock and accounted for using the cost method.

On May 28, 2015 we announced that our board of directors had approved a new share repurchase program (the "2015 repurchase program"). The 2015 share repurchase program authorizes the purchase of up to $1.14 billion of our common stock through and including November 1, 2018. The 2015 repurchase program does not require the company to acquire a specific number of shares and may be suspended or discontinued at any time. During the year ended October 31, 2016, upon the completion of our previous repurchase program, we repurchased approximately 8.3 million shares for $336 million under this authorization. All such shares and related costs are held as treasury stock and accounted for using the cost method.

For the years ended October 31, 2016, 2015 and 2014 cash dividends of $150 million, $133 million and $176 million were paid on the company's outstanding common stock, respectively. On November 16, 2016, we declared a quarterly dividend of $0.132 per share of common stock, or approximately $43 million which will be paid on January 25, 2017 to shareholders of record as of the close of business on January 3, 2017. The timing and amounts of any future dividends are subject to determination and approval by our board of directors.

Looking forward, we expect to continue to focus on the growth of the operating margin in our businesses by simplifying our operations, differentiating product solutions and improving our customer's experience. We anticipate returning a significant proportion of our cash flow to shareholders through our dividend and share repurchase programs. End market growth outlook in today's uncertain political and economic environment is unpredictable and challenging. However, we expect continued strength in the pharmaceutical markets and solid growth in the food and environmental markets but we remain uncertain about the growth in the chemical and energy markets. The unfavorable effects of changes in foreign currency exchange rates has decreased revenue by approximately 2 percentage points for the year ended October 31, 2016. Costs and expenses, incurred in local currency, were subject to the favorable effects due to changes in foreign currency exchange rates reducing our overall net exposure. The impact of foreign currency exchange rates movements can be positive or negative in any period and is calculated by applying the prior period foreign currency exchange rates to the current year period. We anticipate that changes in foreign currency exchange rates will continue to have an unfavorable impact on our performance for the near future.

[Source: Form 10-K dated 2016-12-20]

RELATED COMPANIES Price Int.Val. Rating
WAT Waters 188.14 61.16  str.sell
BRKR Bruker 30.54 21.70  sell
TMO Thermo Fisher 193.86 73.48  str.sell
PKI PerkinElmer 71.73 45.56  sell
ILMN Illumina 209.88 95.84  str.sell
VWR VWR 33.13 21.18  sell
DHR Danaher 90.79 57.36  sell
MTD Mettler-Toledo 668.72 306.90  str.sell
BIO Bio-Rad Labora 221.94 73.49  str.sell

COMPANY NEWS

▶ Beating the Benchmark: American Airlines, Apple   [Sep-26-17 03:18PM  GuruFocus.com]
▶ Company News For August 17, 2017   [09:51AM  Zacks]
▶ TEDxJaksonville 2017: Saving pedestrians   [08:30AM  American City Business Journals]
▶ Urban Outfitters and Agilent climb; Bristol-Myers skids   [Aug-16-17 04:48PM  Associated Press]
▶ Stocks Open Higher; Home Depot, Target Lead Retail Rebound   [09:40AM  Investor's Business Daily]
▶ Agilent beats Street 3Q forecasts   [Aug-15-17 11:22PM  Associated Press]
▶ Silver Airways makes big changes   [Aug-03-17 12:40PM  American City Business Journals]
▶ Agilent Technologies Is Shaping Up Nicely   [08:02AM  TheStreet.com]
▶ Leadership Lesson: Short circuit negative energy - free yourself of complaints   [Jul-21-17 12:20PM  American City Business Journals]
▶ New Strong Buy Stocks for July 19th   [Jul-19-17 10:11AM  Zacks]
▶ Hans E. Bishop to Join Agilents Board of Directors   [Jul-18-17 06:36PM  Business Wire]
▶ There's More Than Meets the Eye to Danaher Corporation   [Jul-07-17 07:29PM  Motley Fool]
▶ Shipping Magnate Bets On Oil's Recovery---Energy Journal   [Jun-27-17 08:13AM  The Wall Street Journal]
Financial statements of A
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

FREE DOWNLOAD
Follow us on:   twitter   twitter   twitter   twitter

VALUATION THEORY       ASSET ALLOCATION

About X-FIN       Site news       Privacy policy       Terms of use       FAQ

Copyright © X-FIN.com 2005-2017. All rigths reserved.