Agilent Downgraded After Strong Earnings. The Stock Is Diving. Here’s Why.

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Agilent

 Technologies’ stock was falling in Wednesday’s premarket after the maker of laboratory instruments cut its outlook for the year.

Shares (ticker:

A

) fell nearly 10% to $116.54 early Wednesday morning. They have now lost nearly a quarter of their value since the start of the year.

After markets closed on Tuesday, the provider of instruments and services for laboratories posted adjusted fiscal second-quarter earnings of $1.27 per share, better than the $1.26 a share expected by analysts. But Agilent trimmed its profit outlook for the year to between $5.60 and $5.65, from up to $5.70 earlier. Annual sales outlook was also lowered to a range of $6.93 billion to $7.03 billion from as much as $7.1 billion predicted earlier.

The lower expectations primarily reflect a loss of demand, especially from small biotech customers who are in strong cash conservation mode as venture capital lending has reduced, CEO Michael McMullen said in a call discussing earnings. He called the space “pretty much shut down,” adding that medium-size and large pharma companies have also become more cautious about spending.

KeyBanc analysts Paul Knight and Harrison Schrage downgraded the stock right after earnings on Tuesday to Sector Weight or Neutral from a Buy equivalent rating earlier. This means they see the shares staying around current levels. There is “a lack of revenue catalysts in the back half,” the firm’s note said.

Citi analysts led by Patrick Donnelly maintained their Neutral call on the stock as well but lowered the price target to $130 from $150 to reflect the uncertainty around instrument demand, according to a Tuesday note.

The next point of focus for investors will be the third fiscal-quarter earnings, Donnelly said. Management predicted earnings of between $1.36 and $1.38 per share in the quarter ending July. That’s a step up from the prior quarter but still lower than Wall Street expectations of $1.40 per share.

Write to Karishma Vanjani at [email protected]