3 Things Deutsche Bank Likes About Agilent's Q3, And One Thing To Be Cautious Of

Agilent Technologies Inc (NYSE: A)'s earnings report was strong enough for Deutsche Bank's Dan Leonard to maintain a Buy rating on the stock with a price target boosted from $66 to $68.

Agilent's fiscal third-quarter earnings report highlighted the company's strong end market exposures, product cycles, and suggests margin expansion opportunities are likely moving forward, the analyst said in a research report. In fact, there were three encouraging aspects of the earnings report which also reinforce the bullish case.

3 Encouraging Signs

First, Agilent's C&E (chemical and energy) segment realized its second consecutive quarter of double digit growth, Leonard wrote. The segment saw broad strength across various products and regions.

Second, Agilent's biopharma business also showed a 10 percent sales growth which similarly to C&E marks the second consecutive quarter of double digit growth. The company also said that it isn't seeing any signs of softness in the customer base which also includes the generic side of the business.

Third, Agilent's operating margin of 21.5 percent was "well above" the 20.8 percent rate the analyst was expecting. In fact, Leonard is expecting even more upside to the margin rate and is modeling a 90 basis point expansion moving forward.

Where To Be Concerned

Finally, Agilent's earnings report wasn't perfect as its organic growth guidance for the fiscal fourth quarter fell short of consensus estimates. However, the "optically conservative growth rate" is due to tougher comps in the biopharma segment and China which grew 16 percent and 27 percent, respectively, in the same quarter a year ago.

Also, the company may have hesitated to "extrapolate forward two consecutive quarters" of double digit growth in Europe.

Bottom line, Agilent's earnings report was "strong all around" and there is plenty of reason to assume the long-term bullish thesis is intact.

At time of publication, shares of Agilent Technologies were up 4.28 percent at $61.91.

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Image Credit: By Matt Perreault (Agilent Technologies) [CC BY-SA 2.0 (http://creativecommons.org/licenses/by-sa/2.0)], via Wikimedia Commons

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