) to sell from buy.
Analyst Mark FitzGerald says Agilent needs $1.75 in earnings-per-share power next year just to support its current $25 price. He says the leverage story was the attraction of the stock over the last 12 months, but thinks this is ending.
He notes managment's guidance implies that the leverage story is slipping backwards, and says the problem is directly attributable to gross margins in chips' 27% of sales, and semiconductor-equipment's 11%.
FitzGerald cuts his $1.27 fiscal 2005 (October) earnings-per-share estimate to $1.10, and sets $1.28 fiscal 2006 earnings-per-share estimate. He has a $16.75 price target, and assumes a multiple of 15 times his new $1.10 fiscal 2005 earnings-per-share estimate ($1.05 adjusted for option expense), adding $1 back in cash.