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Pharma and Food End-Market Pick up Facilitated Agilent Technologies’ 7.8% Dividend Hike

Shauvik Haldar Nov 25, 2020

Agilent Technologies (A) is a leading global player in providing life sciences, diagnostics and advanced chemicals solutions.

It operates through three segments: Life Sciences and Applied Markets (LSAM) segment contributes nearly 45% of the company’s revenue, followed by Agilent CrossLab Group (ACG), which contributes 36%, with the remaining being contributed by Diagnostics and Genomics Group (DGG). However, the ACG is the company’s most profitable segment with an FY 2020 operating margin of 27%. This compares to the 23% operating margin of the LSAM segment.

The LSAM segment is more capital intensive in nature while the other two segments of the company primarily represent a recurring business for the company.

Rebound in Q4 Helps Agilent End 2020 in a Better Fashion

Despite disruption and economic uncertainty caused by the COVID-19 pandemic, Agilent was able to come out of FY 2020 with a revenue of $5.4 billion, up by nearly 3% on a year-over-year basis. The company saw a rebound in Q4 2020 after witnessing significant impact during Q2 and Q3 of 2020.

The recovery in Q4 2020 was primarily led by the uptick in demand in China followed by a quick recovery in pharmaceutical and food markets, which together represents nearly 45% of the company’s end business markets.

Agilent benefited from its largest end market – pharmaceutical and biotech – that grew by 12% during Q4 2020. It’s large molecule business was a highlight of the quarter, posting double-digit growth; and the company’s chemical and energy end market also came out of the red, by posting a decent 3% growth during Q4 2020.

At the same time, healthy growth in Chinese markets (i.e. 13% for Q4 2020) followed by 5% growth in the Americas also helped the company finish the year in a decent manner.

As a result, Agilent was able to grow its EPS by 5% to $3.28 per share for FY 2020 compared to FY 2019. This bodes well with the recent dividend increase announcement, wherein Agilent raised its quarterly payout from 18 to 19.4 cents payable to shareholders of record as of January 5, 2021.

Cash-flow generation remains strong, with the company increasing its operating cash flow by $60 million during Q4 2020. Management’s optimism can be gauged from its 5.2 million share repurchase during FY 2020 for nearly $470 million.

Looking forward, the company expects its DGG division to lead the growth story as the company ramps up the capacity for its Nucleic Acid Solutions Division (NASD) and demand picks up for its cancer diagnostics solutions.

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