Agilent Technologies (NYSE:A) has been downgraded from ‘Buy’ to ‘Neutral’ by UBS analysts who believe that the life sciences and diagnostics company’s overexposure to regional headwinds in China, instrument demand normalization and softening cyclical spending could pressure forecasts.
They highlighted that Agilent makes 20% of its sales in China but a lack of government stimulus, anti-corruption efforts, reshoring, and limited funding availability have pressured biopharma demand in the country.
“China pharma trends remain weak and we believe they are unlikely to improve until the second half of 2024 at the earliest,” they wrote in a note to clients.
“We expect Agilent’s instrument-heavy sales mix to be susceptible to demand normalization and budget tightening.”
On the company’s continued exposure to macroeconomically cyclical industrials, they wrote that Agilent deserves credit for its improving business mix with the addition of secular drivers in cell analysis, its growing nucleic acid Api business and outsized services growth.
“But the confluence of current challenges is unique and we prefer to step to the sidelines,” they wrote.
The UBS analysts awarded the stock a US$125 price target on a multiple that is a premium to its peers on its faster growth prospects offset by outsized exposure to ongoing headwinds.
Shares of Agilent traded down 1.1% at US$113 on Friday afternoon and are down about 24.7% in the year to date.
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