A month has gone by since the last earnings report for Agilent Technologies (A). Shares have added about 4.9% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Agilent due for a pullback? Before we dive into how investors and analysts have reacted as of late, let’s take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Agilent Beats on Earnings and Revenue Estimates in Q3

Agilent Technologies’ fiscal third-quarter 2018 earnings of 67 cents per share came in above the Zacks Consensus Estimate by 4 cents. Earnings increased 14% year over year.

Agilent’s fiscal third-quarter 2018 revenues of $1.203 billion increased 8% year over year. Revenues were within management’s guided range of $1.185-$1.205 billion and above the Zacks Consensus Estimate of $1.195 billion.

The year-over-year revenue growth was supported by strong improvement across all its product lines and regions.

Revenues by Segment

Agilent has three reporting segments — Life Sciences & Applied Markets Group (LSAG), Agilent Cross Lab Group (ACG) and Diagnostics and Genomics Group (DGG).

In the reported quarter, LSAG was the largest contributor and accounted for $540 million or 45% of the total revenues, reflecting an increase of 6% from the prior-year quarter. This was driven by strong performances in the Pharma and Chemical and Energy markets.

Revenues from ACG came in at $426 million or 36% of total revenues, reflecting an increase of 10% year over year. Both services and consumables witnessed growth across all geographical regions.

Revenues from DGG came in at $237 million and accounted for the remaining 19% of total revenues. The segment was up 9% from the year-ago quarter, led by strength in genomics.

Operating Results

The pro-forma gross margin in the quarter was 56.7%, up 130 basis points (bps) sequentially and 160 bps year over year.

Operating expenses (research & development and selling, general & administrative expenses) were $436 million, 10.4% higher than the year-ago quarter.

As a result, adjusted operating margin was 22.3%, up 60 basis points (bps) sequentially and 110 bps year over year.

Balance Sheet

Upon exiting the fiscal third quarter, inventories totaled $623 million, reflecting an increase up from $594 in the prior quarter. Agilent’s long-term debt was $1.8 billion at the end of the quarter. Cash and cash equivalents were $2.1 billion compared with $3.01 billion in fiscal second-quarter 2018.

Net cash provided by operating activities was $197 million and capital expenditure totaled $33 million.

In the reported quarter, the company paid $48 million in dividends. There was no share repurchase activity during the period.

Guidance

Agilent provided guidance for fiscal fourth-quarter 2018.

Agilent expects revenues between $1.24 billion and $1.26 billion and earnings per share in the range of 72-74 cents for the fiscal fourth quarter.

For fiscal 2018, Agilent projects revenues in the range of $4.86-$4.88 billion and earnings per share within $2.69-$2.71.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

VGM Scores

At this time, Agilent has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren’t focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Agilent has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.

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