Barclays Initiates Coverage of Agilent

Jan 06, 2024

NEW YORK – Barclays on Thursday initiated coverage of Agilent Technologies at an Equal Weight rating on its stock and a price target of $140.

In a note to investors, Barclays analyst Luke Sergott said Agilent is well positioned to take advantage of long-term economic trends that could contribute to the company's growth and help it maintain high single-digit top-line/low double-digit increases to its earnings per share. But he expects a better price to take action on the stock.

Sergott said Agilent's management guided to 6 percent growth in fiscal year 2023, which aligns with peers, and Barclays predicts continued expansion through fiscal 2023 although at a slower rate than seen in fiscal 2022.

In Thursday afternoon trading on the Nasdaq, Agilent was down 1 percent at $126.83.

Sergott said demand for diagnostic instruments has been high during the past two years, but investors question how long it can remain elevated and whether it will have a soft landing — which he predicts — or a demand cliff.

Agilent has predicted strong demand for its liquid chromatograph/mass spectrometry instruments through 2024, rebounding demand in genomics and next-generation sequencing markets, and continued innovation that would encourage instrument upgrades and replacements, according to the note. Sergott wrote that Agilent can reach its target of mid-single digit growth of instrument revenues, but none of its recent launches are revolutionary and Barclays has seen mixed signals about instrument demand.

He noted that investors are also concerned about the recovery of Agilent's genomics reagents business following a decline in genomics consumables and China business following COVID-19-related lockdowns and infections.

The genomics reagents business has been soft while specialty diagnostic labs, CLIA labs, and other small-scale labs burned through inventories and cut spending, but Sergott expects those issues are temporary and long-term demand remains solid. He also noted that in the latest quarter, Agilent posted double-digit growth in China from its pharma, food safety and security, and chemicals and advanced materials businesses, whereas it had less exposure than peers to declines in diagnostics and clinical products sales.

In the note, Sergott also predicted Agilent's nucleic acid therapeutics manufacturing business and the expanding market for per- and polyfluoroalkyl substances (PFAS) testing will provide significant contributions to the company's growth.