Agilent Technologies (NYSE: A), a manufacturer of equipment for scientific testing, reported third quarter earnings on Monday after the bell. It was a challenging quarter for the business, but estimates were beat, at least.
Revenues fell 27%. Earnings on an adjusted basis likewise took a severe tumble, coming in at 15 cents per share. Agilent made well over three times that amount in the year-ago quarter. Here's the saving grace: according to Reuters, the company earned four more pennies than the average estimate.
It's not much of a saving grace, if you ask me. The other statistics in the release seem to tell a sad tale. Cash flow from operating activities plummeted. Return on invested capital, a very important metric, was 9% in Q3 2009; the figure was 27% in Q3 2008. Orders were very weak, too.
I'm not in any rush to buy this stock. As the economy improves, the numbers will get better. But I want to seek out investment ideas with better fundamentals. Another thing: Agilent recently announced that it will acquire competitor Varian (NASDAQ: VARI). I can see the logic of this move, and, if the purchase closes as expected, it's reasonable to assume that it might add value over time. However, this is yet another reason to be wary of buying now, at least in my opinion. I sometimes don't like buying companies when they are in the middle of significant acquisition strategies. My preference is to wait a bit so as to have sufficient time to study the situation and think about how the thesis might change once the integration of the new asset is complete. Besides, Agilent, like many other stocks, might need to pause for a little while before making another move to the upside.
Disclosure: I don't own any company mentioned; positions can change without notice.
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