Shares of Agilent Technologies (NYSE: A ), which provides instruments and consumables for laboratories, are trading at $113 per share, 10% below the level seen in March 2021. Agilent’s stock was trading at about $118 in early June 2022, just before the Fed started. rising rates, and is now 4% below that level, compared to 19% gains for the S&P 500 over this period. The company reported its fiscal Q4’23 results yesterday, with revenue down 8.7% indeed to $1.69 billion and earnings of $1.38 per share and an adjusted basis down 10%. The company’s top line has contracted in the recent past due to lower sales in China. However, both metrics were better than the street estimates.
Looking slightly longer term, Agilent shares have seen little change, moving slightly from levels of $115 in early January 2021 to around $115 now, versus a rise of around 20% for the S&P 500 over this roughly 3-year period. Overall, the performance of A share with respect to the index was quite volatile. Returns for the stock were 36% in 2021, -6% in 2022, and -24% in 2023 (YTD). By comparison, returns for the S&P 500 were 27% in 2021, -19% in 2022, and 18% in 2023 (YTD) – indicating that A underperformed the S&P in 2023.
In fact, consistently beating the S&P 500 – in good times and bad – it’s been tough over the past few years for individual stocks; for heavyweights in the Healthcare sector, including LLY, UNH and JNJ, and even for the mega-cap stars GOOG, TSLA and MSFT.
In contrast, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has outperformed the S&P 500 every year during the same period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index, less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.
Given the current uncertain macroeconomic environment with high oil prices and high interest rates, A could face a similar situation as it did in 2023 and underperforms the S&P over the next 12 months – or will it see a sharp jump? Returning to the pre-inflation shock high of over $175 (seen in September 2021) means that A share will need to gain about 55% from here, and we don’t think that will happen anytime soon. That said, A stock currently trades at 4.7x earnings, below its last five-year average of 5.7x, and appears to have some room for growth. Ours Agilent Technologies (A) Valuation Ratio Comparison panel has more details.
Our detailed analysis of Agilent Technologies’ post-inflationary shock captures trends in the company’s stock during the turbulent market conditions seen throughout 2022. It compares those trends to the stock’s performance during the 2008 recession.
Timeline of Inflationary Shock So Far:
- 2020 – early 2021: Increase in money supply to mitigate the impact of blockade led to high demand for goods; producers unable to match.
- Early 2021: Shipping crunches and labor shortages from the coronavirus pandemic continue to hurt supply.
- April 2021: Inflation rates cross 4% and are rising rapidly.
- Early 2022: Energy and food prices rise due to the Russian invasion of Ukraine. Fed begins its rate hike process.
- June 2022: Inflation levels peak at 9% – the highest level in 40 years. The S&P 500 index is down more than 20% from peak levels.
- July – September 2022: Fed raises interest rates aggressively – resulting in an initial recovery in the S&P 500 followed by another sharp decline.
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October 2022 – July 2023: Fed continues the process of increasing the rate; improving market sentiments are helping the S&P500 recover some of its losses.
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As of August 2023: The Fed has kept interest rates unchanged to quell fears of a recession, although another rate hike remains on the cards.
In contrast, this is how A-share and the broader market performed during the 2007/2008 crisis.
Timeline of 2007-08 Crisis
- 10/1/2007: Approximate pre-crisis peak in S&P 500 index
- 9/1/2008 – 10/1/2008: Accelerated market decline corresponding to Lehman bankruptcy (9/15/08)
- 3/1/2009: Approximate bottom from S&P 500 index
- 12/31/2009: Initial recovery to levels before accelerated decline (circa 9/1/2008)
Agilent and S&P 500 Performance During 2007-08 Crisis
Agilent’s stock declined from nearly $24 in September 2007 (pre-crisis peak) to $9 in March 2009 (when the markets bottomed out), implying that it lost 62% of its pre-crisis value. It recovered from the 2008 crisis to levels of around $20 in early 2010, increasing over 2x between March 2009 and January 2010. The S&P 500 Index saw a decline of 51%, falling from levels of 1,540 in September 2007 to 2009 in March . It then gathered 48% between March 2009 and January 2010 to reach levels of 1,124.
Agilent’s Fundamentals over the last few years
Revenue from Agilent Technologies increased from $5.2 billion in 2019 to $6.8 billion in 2022, led by an increase in overall demand for the company’s laboratory products. Its three segments – Life sciences and applied markets, Diagnostics and genomics, and Agilent CrossLab contributed to peak expansion. However, looking at the recent past, the company’s revenue fell 3% year over year to $1.7 billion in Q3 due to lower sales in life sciences and applied markets in China.
The company’s earnings were $4.19 on a per-share and reported basis in 2022, compared to the $3.41 figure in 2019. Considering the slow demand in China, the company lowered its 2023 sales outlook to now decline by about 0.7% and adjusted the income to be. in the range of $5.40 and $5.43, compared to its previous guidance of 1.2% to 2.7% sales growth and $5.60 to $5.65 in earnings.
Does Agilent Technologies Have Sufficient Cash Cushion To Meet Its Obligations Through The Ongoing Inflationary Shock?
Agilent Technologies’ total debt increased from $2.4 billion in 2019 to $2.8 billion now, while its cash decreased from $1.4 billion to $1.3 billion over the same period. The company also generated $1.7 billion in cash flows from operations in the last twelve months. Given its cash cushion, Agilent is in a good position to service its near-term obligations.
Conclusion
With the Fed’s efforts to tame rampant inflation rates helping market sentiment, we believe Equity has the potential for more gains once fears of a potential recession are eased. That said, adverse macroeconomic factors and sluggish demand in China are potential risk factors to realizing these gains.
While A stock may see higher levels, it is useful to see how Partners of Agilent Technologies rate on metrics that matter. You’ll find other valuable comparisons for companies across industries at Peer Comparisons.
returns | Nov 2023 MTD (1) |
2023 YTD (1) |
2017-23 Total (2) |
Return | 10% | -24% | 163% |
S&P 500 Return | 8% | 18% | 103% |
Hit Enhanced Value Portfolio | 8% | 27% | 552% |
(1) Month and year-to-date from 11/20/2023
(2) Cumulative total profit since the end of 2016
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.