Agilent Technologies (A) 55 3/4: This diversified technology company is being heralded for easily surpassing analysts' earnings expectations for its fiscal Q3. It's easy to see why, too, considering the First Call consensus stood at $0.20 and Agilent posted a profit of $0.33 per share. The reason the consensus was at the level, though, was because Agilent told the Street to lower earnings estimates last month, saying it expected earnings for the July quarter to come in at $0.18-$0.22 per share due to capacity constraints, component shortages, and continued weakness in its healthcare solutions business. At the time, the consensus EPS estimate was $0.35. The market's response to that news was swift and punishing as Agilent's stock plunged nearly 30% immediately following the warning. Similarly, the response to the actual earnings news has also been swift, but this time it has been rewarding, as Agilent's stock is indicated to open roughly 20% higher from yesterday's NYSE close of 46 1/2. Highlights for the quarter included record orders ($3.2B) and record revenues ($2.7B), which jumped 44% and 28% respectively yr/yr. Driving those gains were its test and measurement and semiconductor products divisions. Orders at the former increased 63% to $1.9B and revenues surged 51% to $1.5B; whereas orders at the latter soared 60% to $730 mln and sales improved 41% to $591 mln. Agilent's business wasn't robust across-the-board, however, as its chemical analysis unit saw orders increase only 8% to $269 mln and its revenues slip 4% to $246 mln. Weakness in the healthcare solutions business-- where orders dropped 13% to $318 mln and revenues fell 14% to $319 mln-- was one of the few things Agilent forecasted correctly in its earnings warning last month. In a remarkable turn of events, some parts Agilent needed arrived at the end of the quarter, enabling it not only to make more shipments on time, but to handily beat its own earnings guidance. Hence, the doom-and-gloom that hit the stock a month ago has now been replaced with a feeling of optimism as Agilent said it felt comfortable with Q4 EPS of $0.39 and raised its revenue guidance for FY01 from 15% to 20%. Net earnings are expected to approach 8% of net revenues. That's great to hear, but frankly, we'd take it with a grain of salt in light of Agilent's misguided guidance for Q3. Although the Q4 and FY01 guidance will sell well today, Agilent will need to do a better job of forecasting its earnings if it wants to retain the trust of long-term investors.-- Patrick J. O'Hare, Briefing.com
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