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Agilent aces latest estimate
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August 17, 2000: 6:46 p.m. ET
Test and measurement equipment maker beats lowered mark, nears earlier forecast
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NEW YORK (CNNfn) - Agilent Technologies on Thursday reported a fiscal third-quarter profit that surpassed Wall Street's recently lowered expectations.
And executives at the Palo Alto, Calif.-based producer of test and measurement equipment boosted their revenue-growth forecast for fiscal 2001.
During the quarter ended July 31, Agilent said it earned $155 million, or 33 cents per share. That compares with a consensus estimate of 20 cents per share, according to earnings tracker First Call.
Revenue rose 28 percent to $2.7 billion, with the company reporting particular strength in the company's communications and electronics business lines.
The results were well ahead of the Street's expectations and nearly matched a previous forecast of 35 cents per share, which analysts had forecast prior to a warning from the company.
Late last month, Agilent (A: Research, Estimates) sharply reduced its quarterly profit outlook, saying it would not be able to meet previous Street expectations of 35 cents per share, blaming a shortage of components that caused a backlog of orders.
 Agilent executives credited stronger shipments during the last month of the quarter for the sharp upside surprise.
"The results show that the actions we've been taking for many months to address capacity and parts issues have begun to pay off," Ned Barnholt, Agilent's chief executive, told analysts during a teleconference Thursday evening.
But some analysts pointed out that the gap between the lowered expectations and the actual results could also have resulted from inefficient internal reporting mechanisms within the organization, which Barnholt acknowledged during the conference call.
After its split from former corporate parent Hewlett-Packard, Agilent has no fewer than 2,000 software systems running the various divisions of the firm. While he said he is aiming to bring that number down to two, Barnholt admitted that the current administrative system remains fairly unwieldy at this point.
"I'm sure the company feels embarrassed that they cut guidance so far only to have things reverse themselves less than a month later," said Bear Stearns analyst Robert Maire.
"It leads one to wonder how reliable the projections and guidance from management are," Maire added. "Here, it was a positive incident in that the reality came in better than the projection. But let's say the opposite were true and reality came in well under predictions. People would be more upset."
Nevertheless, Investors applauded the news, driving shares to 55-1/8 in after hours trading, up from their New York Stock Exchange close of 46-1/2.
Looking ahead, Agilent's Barnholt said the company is on track to post higher earnings in the current quarter and higher revenue growth in fiscal 2001. 
"Given our excellent position in the communications and electronics markets and our strong backlog levels, we continue to feel comfortable with fourth quarter earnings per share of 39 cents," Barnholt said.
For fiscal 2001, Barnholt told analysts to expect Agilent to post revenue growth of 20 percent, compared with a previous estimate of 15 percent. Net earnings for the year should approach 8 percent of revenue, Barnholt said.
Health care woes continue
During the fiscal fourth quarter, the company plans to take a $25 million charge against earnings in connection with the restructuring of its health care unit.
Earlier this week, Agilent said it would trim that division's work force by 450 jobs in a move it said will result in $80 million of annual saving beginning in 2001.
At $319 million, Agilent's health care business posted a 14 percent decline in revenue during the most recent quarter. Meanwhile, its operating loss was $40 million, compared with an operating of $41 million during the same period last year.
"We expect to post an operating loss here in the fourth quarter and do not anticipate a significant improvement in this business until 2001," said Robert Walker, Agilent's chief financial officer.
The company's chemical analysis division also posted a slight decline in revenue, which, at $246 million, was down 4 percent from last year's third quarter. Operating losses were $8 million, compared with a profit of $36 million in the year-ago quarter. The company is shifting that unit's focus to the higher-growth bioscience and pharmaceutical markets.
Meanwhile, the company's core test-and-measurement division posted a 51 percent year-over-year gain in net revenue, which came in at $1.5 billion. Earnings from operations in that unit increased to $162 million, compared with $122 million in the same period a year ago.
Sales in Agilent's semiconductor products division rose 41 percent to $591 million, after adjusting for the transfer of products to a joint venture and Agilent's exit from the microprocessor business. Semiconductor operating earnings were $99 million, a 48 percent increase over last year's third quarter, adjusted for a one-time charge. 
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