Agilent Technologies’ (A, Financial) stock dipped 12.8%, reducing the Fund’s return by 0.3%, after management cut its revenue guidance slightly. The company is not alone in seeing a slowdown in pharma spending, driven by a normalization of analytical instrument demand and a constrained biotech funding environment impacting smaller customers. Nonetheless, we believe Agilent remains a quality compounder now trading at an attractive price, as the company continues to gain market share in an industry with very high switching costs. The Agilent story still has several idiosyncratic drivers that could drive upside to earnings expectations, such as PFAS and lithium-ion battery testing, as well as RNAi oligonucleotide manufacturing. We also believe the company continues to have a long runway of consistent margin expansion as it increases the attach rate of high-margin consumables and services within its large installed base of instruments.
From the Parnassus Value Equity Fund (Trades, Portfolio)'s second-quarter commentary.
