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Illumina's (ILMN) Q4 Earnings to Show Growth in All Lines

Illumina, Inc. ILMN is slated to report fourth-quarter fiscal 2017 results on Jan 30, after market close. Last quarter, the company delivered a positive earnings surprise of 13.3%. Let's see how things are shaping up ahead of this announcement.

Let’s take a look at Illumina’s announcement of preliminary fourth-quarter results at the J.P. Morgan Healthcare Conference held in San Francisco, CA.

Per the announcement, preliminary revenues for the fourth quarter are estimated at $775 million, up 25% year over year. The figure is also higher than the Zacks Consensus Estimate of $748 million.

The preliminary figure for 2017 revenues is $2.75 billion, up 15% from 2016 driven by the adoption of NovaSeq and growth in clinical and consumer genomics. The figure is also above the Zacks Consensus Estimate of $2.72 billion.

Illumina, Inc. Price and EPS Surprise

 

Illumina, Inc. Price and EPS Surprise | Illumina, Inc. Quote

 

Similar to last quarter, Illumina is expected to gain from strong Product as well as Service and other revenues. Over the last few quarters, the company’s product revenues increased primarily on higher sequencing consumable revenues. Total Service and other revenues demonstrate strong growth led by continued demand for NextSeq from NIPT customers and partners.

The company expects fourth-quarter sequencing consumables to increase more than 30%, up $100 million from the year-ago quarter on the back of increased utilization in the high throughput systems and strong pull-through on NextSeq.

The Zacks Consensus Estimate for Product revenues of $621 million reflects an increase of 4.2% from the year-ago quarter. Also, the Zacks Consensus Estimate for Service and other revenues of $121 million indicates a rise of 2.5% from the year-ago quarter.

Here are the other factors that might influence Illumina’s fourth-quarter results:

In November 2017, Illumina introduced its second FDA-regulated and CE-IVD marked next-generation sequencing (NGS) system — NextSeq 550Dx. With this, Illumina now has a solid diagnostic NGS portfolio, courtesy of its NextSeq 550Dx and the MiSeqDx products. This portfolio is capable of meeting any clinical requirement for NGS-based in vitro diagnostic (IVD) products. This is likely to boost the top line in the yet-to-be-reported quarter.

Last October, Illumina announced the availability of the NovaSeq S4 flow cell and reagent kit for its NovaSeq 6000 System. Management expects to witness strong NovaSeq uptake through the fourth quarter of 2017 into 2018 and beyond. Moreover, in the same month, Illumina announced the availability of Nextera DNA Flex — a whole genome sequencing library prep product. We expect these factors to drive revenues as well.

Also, encouraged by the solid third-quarter performance, Illumina raised its adjusted EPS to the band of $3.73-$3.78 from the earlier $3.60-$3.70.

On the flip side, a tough competitive landscape may pose a challenge. We are also apprehensive about issues pertaining to NIH funding, which Illumina has been facing for quite some time now.

Here is what our quantitative model predicts:

Illumina has the right combination of two main ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or better — for increasing the odds of an earnings beat.

Zacks ESP: The Earnings ESP for Illumina is +0.84%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Illumina carries a Zacks Rank #3.

The Zacks Consensus Estimate for earnings of 98 cents reflects a 1% improvement on a year-over-year basis.

Other Stocks Worth Considering

Here are a few medical other stocks worth considering as they have the right combination of elements to post an earnings beat this quarter.

Bio-Rad Laboratories, Inc. BIO has an Earnings ESP of +4.45% and a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Myriad Genetics, Inc. MYGN has an Earnings ESP of +0.42% and a Zacks Rank #3.

Henry Schein, Inc. HSIC has an Earnings ESP of +0.35% and a Zacks Rank #3.

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