Agilent Technologies stock (NYSE: A), which provides instruments and consumables for laboratories, trades at $113 per share, 10% below the level seen in March 2021. Agilent’s stock was trading at around $118 in early June 2022, just before the Fed started increasing rates, and is now 4% below that level, compared to 19% gains for the S&P 500 during this period. The company reported its fiscal Q4’23 results yesterday, with revenue falling 8.7% y-o-y to $1.69 billion and earnings of $1.38 on a per share and adjusted basis were 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 at a slightly longer term, Agilent stock has seen little change, moving slightly from levels of $115 in early January 2021 to around $115 now, vs. an increase of about 20% for the S&P 500 over this roughly 3-year period. Overall, the performance of A stock with respect to the index has been quite volatile. Returns for the stock were 36% in 2021, -6% in 2022, and -24% in 2023 (YTD). In comparison, returns for the S&P 500 have been 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 – has been difficult over recent years for individual stocks; for heavyweights in the Health Care sector, including LLY, UNH, and JNJ, and even for the megacap stars GOOG, TSLA, and MSFT.
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In contrast, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has outperformed the S&P 500 each year over 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 elevated interest rates, could A face a similar situation as it did in 2023 and underperform the S&P over the next 12 months – or will it see a strong jump? Returning to the pre-inflation shock high of over $175 (seen in Sep 2021) means that A stock will have to gain around 55% from here, and we don’t think that will materialize anytime soon. That said, A stock currently trades at 4.7x revenues, below its last five-year average of 5.7x, and appears to have some room for growth. Our Agilent Technologies (A) Valuation Ratios Comparison dashboard has more details.
Our detailed analysis of Agilent Technologies’ upside post-inflation shock captures trends in the company’s stock during the turbulent market conditions seen over 2022. It compares these trends to the stock’s performance during the 2008 recession.
Timeline of Inflation Shock So Far:
- 2020 – early 2021: Increase in money supply to cushion the impact of lockdowns led to high demand for goods; producers unable to match up.
- Early 2021: Shipping snarls and worker shortages from the coronavirus pandemic continue to hurt supply.
- April 2021: Inflation rates cross 4% and increase rapidly.
- Early 2022: Energy and food prices spike 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 declined more than 20% from peak levels.
- July – September 2022: Fed hikes interest rates aggressively – resulting in an initial recovery in the S&P 500 followed by another sharp decline.
October 2022 – July 2023: Fed continues rate hike process; improving market sentiments helps S&P500 recoup some of its losses.
Since August 2023: Fed has kept interest rates unchanged to quell fears of a recession, although another rate hike remains in the cards.
In contrast, here’s how A stock 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 filing (9/15/08)
- 3/1/2009: Approximate bottoming out of S&P 500 index
- 12/31/2009: Initial recovery to levels before accelerated decline (around 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 (as the markets bottomed out), implying it lost 62% of its pre-crisis value. It recovered after the 2008 crisis to levels of around $20 in early 2010, rising 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 757 in March 2009. It then rallied 48% between March 2009 and January 2010 to reach levels of 1,124.
Agilent’s Fundamentals Over Recent Years
Agilent Technologies’ revenue 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 have contributed to top line expansion. However, looking at the recent past, the company’s revenue declined 3% y-o-y to $1.7 billion in Q3 due to lower sales in life sciences and applied markets in China.
The company’s earnings stood at $4.19 on a per-share and reported basis in 2022, compared to the $3.41 figure in 2019. Given the slowing demand in China, the company lowered its 2023 sales outlook to now decline about 0.7% and adjusted earnings 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 A Sufficient Cash Cushion To Meet Its Obligations Through The Ongoing Inflation 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 garnered $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.
With the Fed’s efforts to tame runaway inflation rates helping market sentiment, we believe A stock has the potential for more gains once fears of a potential recession are allayed. That said, unfavorable macroeconomic factors and slowing demand in China are potential risk factors for realizing these gains.
While A stock can see higher levels, it is helpful to see how Agilent Technologies’ Peers fare on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.
|S&P 500 Return||8%||18%||103%|
|Trefis Reinforced Value Portfolio||8%||27%||552%|
 Month-to-date and year-to-date as of 11/20/2023
 Cumulative total returns since the end of 2016