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Agilent (A): Measuring Value Ahead Of Earnings

 November 19, 2012 11:19 AM

By Kevin Donovan

Who hasn't had a boss who boomed:  "Bumstead, if you can't measure it, you can't manage it, old boy."  The beauty of Shakespeare's sonnets and Mickey Mantle's swing aside, everything else in this workaday world must be put into numbers, which is where scientific tool-maker Agilent Technologies (A) comes in.  We're buyers ahead of fiscal fourth-quarter results due after the close today.

Our conviction hinges on valuation.  At a trailing 12-months price-to-earnings multiple of 12.4, the shares are valued closer to the bottom of their five-year range of 11.3 to 16.1.  Using the midpoint of that range on forward earnings estimates, we derive a price target of $45, the 52-week high, and a potential return of about 25%.  The stock has traded as low as $32.26 in the last year.  Meanwhile, investors are compensated with a 1.12% dividend yield, our outlook

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For the technically inclined, Agilent is also compelling, given the double-bottom formation seen in this chart:

Source: Finviz.com

Analysts expect on average Agilent will report earnings per share of $0.80 for the quarter ending Oct. 31 compared with $0.84 in the year-ago period and $0.79 in the third fiscal quarter.  Revenue is pegged at $1.76 billion versus $1.73 billion a year ago.

Based in Santa Clara, Calif., Agilent is a leading supplier of scientific measuring instruments, including oscilloscopes.  These devices are widely used in applications as varying as diagnosing automotive ignition systems to displaying the waveform of a heart beat in an electrocardiogram.

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We think the company's history of innovation (Agilent is a 1999 spin-off from Hewlett-Packard) is an investment positive that bodes well for growth. Agilent recently unveiled its InfiniiVision 4000 X-Series digital-storage and mixed-signal oscilloscopes offering bandwidths from 200 MHz to 1.5 GHz and an industry-leading update rate of 1 million waveforms per second.

The new scopes feature an intuitive touch-screen interface and high-speed update rate that increases the probability of "capturing random or intermittent events that often go undetected by scopes with lower update rates," the company says. The interface includes an alphanumeric touchpad that replaces knob-based operation, and touch-based interaction that enables greater flexibility in displaying measurement information.

In addition to oscilloscopes, Agilent's products include chromatographs, spectrometers, signal sources, signal and network analyzers, atomic force microscopes and nuclear magnetic spectrometers.
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