Agilent beats on earnings while Medtronic and Enanta struggle

While biotech stocks have struggled in 2022, Agilent Technologies capped off a positive fiscal year with a strong set of results. Medtronic, however, missed analysts’ earnings expectations and lowered its earnings guidance, while Enanta saw its losses widen year-over-year.

- Agilent Technologies posts 10.07% earnings beat

- US biotech industry worth $2.9trn in 2021, expanding workforce by 11%

- Health Care Select Sector SPDR Fund outperforms SPDR S&P Biotech ETF

Biotech stocks like Agilent Technologies [A], Medtronic [MDT] and Enanta Pharmaceuticals [ENTA] have had to contend with a fallback in demand and investment during 2022, while being squeezed by the inflationary impacts of Russia’s invasion of Ukraine.

Agilent Technologies’ share price has fallen 2.1% in the year-to-date, while Medtronic’s shares have declined 21.9% and Enanta is down 39.8% over the same period.

Agilent’s shareholders were buoyed ahead of Tuesday’s earnings announcement, with news the previous week that the company’s quarterly dividend was increasing from $0.21 to $0.22 per share.

Medtronic released two new products to market the week before its third quarter (Q3) earnings announcement: an insulin pump infusion set that doubles wear time to an unprecedented seven days and the IRRA flow system, a stroke treatment which Medtronic will have exclusive marketing rights to in certain US territories following an agreement signed with IRRAS [IRRAS.STO].

Meanwhile, Enanta highlighted the fact that the research and development war against Covid-19 is still raging, announcing a Phase 2 clinical trial of its oral, antiviral coronavirus treatment EDP-235 on 9 November.

Biotech stocks post mixed earnings

On 21 November, Agilent announced revenue of $1.85bn, an 11% year-over-year increase, as well as non-GAAP earnings per share (EPS) of $1.53, a 26% growth from the final quarter of its prior fiscal year. The EPS figure exceeded analyst expectations by 10.1%. The Agilent Technologies share price surged as high as 8.5% on 22 November following the release of the results.

Medtronic, meanwhile, reported $7.6bn revenue and non-GAAP diluted EPS of $1.30 on 22 November. The revenue figure missed analyst expectations by 1.4%, while EPS exceeded expectations by 1.6%, despite marking a 2% year-over-year decline. Unfavourable foreign exchange rates and ongoing supply chain disruptions weighed on Medtronic’s results, with the company reducing its full-year profit forecast from $5.53 to $5.65 per share to between $5.25 and $5.30.

Enanta also reported on 21 November, with revenue totalling $20.3m, 11.1% shy of analyst expectations. Losses widened 4.1% year-over-year to $1.27 per share, although this was a 5.9% improvement on expected losses of $1.35 per share.

US biotech market expands workforce

Mike McMullen, Agilent’s president and CEO, hailed “another excellent year” for the company, praising the double digit core revenue growth achieved in each of its business units.

Medtronic’s Chairman and CEO Geoff Martha said the company would “continue to take decisive actions to improve the overall performance of the company,” suggesting actions including streamlining its organisational structure and “driving a performance culture.”

Meanwhile, Jay Luly, CEO of Enanta, hailed the potential of EDP-235 “to fill the need for rapid treatment of Covid-19 infection as a once-daily, oral treatment,” given the rise of vaccine-resistant strains of the virus.

Despite the struggles for biotech stocks this year, the market is thriving in the US, according to a 28 October report from the Biotechnology Innovation Organisation (BIO) and the Council of State Bioscience Associations (CSBA). While across the US economy 1.5% jobs have been lost since 2018, the biotech industry has expanded its workforce by 11%. The industry was worth $2.9trn in 2021, according to the report.

Funds in focus: The Health Care Select Sector SPDR Fund

The Health Care Select Sector SPDR Fund [XLV] holds both Medtronic and Agilent, with 2.05% and 0.91% weightings, respectively, as of 22 November. The fund has fallen 2.1% year-to-date, but is up 7.7% over the past month.

The Health Care Select Sector SPDR Fund does not hold Enanta, though the stock is held by another SPDR fund, the SPDR S&P Biotech ETF [XBI]. As of 22 November, the fund has a 0.46% weighting in Enanta. It had fallen 27.65% in the year-to-date, but was up 2.7% over the past month.

Of the three companies, analysts on average see the most upside for Enanta Pharmaceuticals, with nine analysts reporting to CNN Business giving a median price target of $74.00, marking a potential 64.6% gain over the next 12 months. The median figure among 16 analysts providing targets for Agilent is $160.00, and represents 3% potential upside, while the median price target for Medtronic of $88 sees the stock potentially gaining 11.4%, according to 21 analysts.