Goldman Sachs Sees Upside in Agilent (A) and Adds Stock to Conviction Buy List

(Updated - May 11, 2016 9:34 AM EDT)

Goldman Sachs upgraded Agilent (NYSE: A) from Buy to Conviction Buy with a price target of $49.00 (prior $47.00), implying upside of 17%. Analyst Isaac Ro thinks EPS drivers are "underappreciated," and he models above consensus results.

"We have increased confidence in EPS upside following lateral data points among peers during 1Q earnings season and recent FX trends. As such, we think consensus underappreciates the potential for upside in Agilent’s top-line and operating margin performance, both of which we think will outpace the peer group average over the next few years," said Ro.

Discussing catalyst, the analyst said, "We see two near-term catalysts that we think will drive upside in A shares. (1) F2Q earnings: A will report F2Q results on May16. We anticipate better-than-expected results and guidance. We model F2Q revenue that is 1% above consensus and in-line EPS. For FY16, we model revenue/EPS that is 2%/3% above consensus. (2) Investor meeting: The company’s annual investor meeting will be held in New York on May 25. We are bullish on the potential for positive revisions to consensus EPS in the out-years, as the company is likely to provide updates on key assumptions and progress behind long-term margin expansion initiatives. We also look for an update on capital allocation plans which could drive incremental upside to our outlook."

For an analyst ratings summary and ratings history on Agilent click here. For more ratings news on Agilent click here.

Shares of Agilent closed at $42.00 yesterday.

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