Agilent (A) CEO on Creating Advanced Scientific Instruments

The CEO of Agilent (A), Padraig McDonnell, joined Market On Close to discuss the company’s earnings and evolving business.

Agilent bills itself as a global leader in life sciences, diagnostics, and applied markets. It creates specialized instruments for a variety of scientific tests and disciplines, including chromatography and mass spectrometry, and offers clinical and diagnostic testing. It stocks both the delicate hardware, and the reagents they need to unlock scientific puzzles. On top of that, it also offers software resources, giving it greater agility.

By necessity, even simple utensils like a glass beaker have complicated creation processes. A glass beaker has to stand up to the potentially caustic chemicals inside it, respond well to heat or cold, and other factors that make manufacturing more complicated. Lab beakers tend to be made of borosilicate glass vs the more common soda-lime.

Thus, to some extent Agilent has a moat by pure feasibility. There are other equipment makers, but the manufacturing necessities mean it’s hard for an upstart player to jump in.

As far as tariffs, McDonnell says Agilent has been able to mitigate “most of” the impacts around China, and touches on their work within the Chinese market itself. In its most recent quarterly report, Agilent said that the Americas made up 39% of revenue, Europe 28%, with Asia-Pacific accounting for the last 33%.

Agilent is also reshoring manufacturing, expanding their current U.S. facilities, and expects to benefit over the years as other organizations reshore labs to the U.S. and need scientific supplies.

Turning to the financials, “We had a strong third quarter,” McDonnell says. EPS was $1.37, in line with expectations, and revenue of $1.74 billion beat estimates and grew 10% year over year. Consumables, services and informatics made up 66% of the total revenue mix, with instruments at 34%.

Agilent also raised its FY25 core growth outlook to 4.5% after reporting five consecutive quarters of “accelerating core growth.”

McDonnell notes high satisfaction scores among customers, along with strong growth in pharma (+9%), chemical and advanced materials (+10%), and food (+7%). Of note, environmental and forensics fell 5%, which the company attributed to reduced public spending in the U.S. and China.

Despite this, a fast-growing segment of their environmental business is PFAS testing; Agilent says demand remains “very strong ex-U.S.”

PFAS are manmade “forever chemicals” that can be found water supplies or food. Because of their slow breakdowns, PFAS can accumulate in the environment and in human bodies. The EPA writes that PFAS exposure has been linked to adverse health effects, including certain cancers, interference with the body’s hormonal system, and developmental effects on children.

“Our instruments have the sensitivity…to test at a very, very high specificity,” McDonnell says, “It’s like looking for a drop of water in an Olympic-sized swimming pool.” He expects this testing to be a “long-term” source of revenue for the company and emphasizes the importance of detecting and removing these chemicals.

Overall, Agilent may not spark the same excitement that the megacap tech companies or AI players do, but it is an important part of the scientific and technological ecosystem. As it begins a 3-year transformation plan, called Ignite, investors must judge whether it is moving in the right direction for the future of these sectors.

Watch the full interview below:

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