Illumina, Inc. ILMN is slated to release first-quarter 2020 results on Apr 30, after market close. In the last reported quarter, the company’s earnings of $1.70 surpassed the Zacks Consensus Estimate by 6.9%. Over the trailing four quarters, its earnings outperformed the Zacks Consensus Estimate on all occasions, the average positive beat being 16.6%.
Let's discuss the factors that are likely to have impacted its performance in the quarter.
Factors at Play
Illumina, which has a strong international presence, is likely to been affected by the lockdowns imposed in several nations to control the spread of coronavirus. This is because such restrictions have postponed non-emergency and elective healthcare healthcare activities.
Illumina, Inc. Price and EPS Surprise
Illumina, Inc. price-eps-surprise | Illumina, Inc. Quote
It is to be noted that the company’s first-quarter 2020 preliminary results were strong overall. According to the company, in the quarter, strong sequencing consumable revenues more than offset the coronavirus-led disruption on its system sales toward the quarter-end.
Here we take a look at the company’s core segments and how they might have performed otherwise in Q1.
For the past few quarters, Illumina has been registering strong growth in its sequencing portfolio, offset by a decline in arrays revenues and HiSeq consumable shipments. This is likely to have continued in the first quarter as well. However, softness within the DTC (direct-to-consumer) market is expected to have dented the company’s array business in the first quarter, as was the case in the last reported quarter.
However, Illumina is upbeat about the accelerating adoption of comprehensive genomic profiling and the next-generation sequencing tests.
Illumina’s NovaSeq consumable pull-through was quite impressive and total sequencing consumable revenue was robust in the fourth quarter. This was driven by expansion of sequencing volume and partly by the fully-operating UK Biobank. The trend is expected to have continued in the first quarter 2020, as stated in the preliminary results of the company. However, like the fourth quarter, conversion from HiSeq is likely to have continued in the first quarter, thus denting revenues.
NextSeq, which witnessed increased customer adoption in the fourth quarter, is likely to have maintained its momentum. The strong fourth-quarter NextSeq system shipments are expected to have continued on high NextSeq DX uptake.
The first quarter has most likely seen revenue contribution from the new NextSeq 1000 and NextSeq 2000 systems as well.
However, we are wary about results of the company’s Low-Throughput system family shipments — including MiSeq, MiniSeq and iSeq. We anticipate this segment’s revenues to lag expectations in the first quarter primarily due to persisting softness in MiniSeq, like the last reported quarter.
The Sequencing Services portfolio is likely to have seen a drop in revenue growth due to lower IVD licensing, as witnessed during the fourth-quarter earnings call. However, oncology development revenues are expected to have maintained its growth momentum. Strength in oncology development is expected to have contributed to the top line in the quarter. However, we are apprehensive that declining Gel sequencing volumes have most likely dented revenue growth in the to-be-reported quarter, as was the case in the last reported quarter.
The Zacks Consensus Estimate for first-quarter total sequencing revenues is pegged at $757 million, suggesting a decrease of 9.6% from the last reported quarter.
In the to-be-reported quarter, Illumina expects a rise in total revenues of 1.4% on a year-over-year basis to $858 million, subject to quarter-end closing adjustments.
However, the company withdrew its 2020 revenue and earnings per share guidance as it is not able to gauge the extent of severity and duration of the outbreak.
The Zacks Consensus Estimate for total revenues of $856.9 million suggests growth of 1.3% from the prior-year quarter’s figure.
However, the consensus mark for earnings of $1.26 per share indicates a 21.3% decline from the year-ago quarter's reported figure.
What Our Quantitative Model Predicts
Per our proven model, a stock with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) along with a positive Earnings ESP has good chances of beating estimates. This is the case here as you can see:
Zacks Rank: The company currently carries a Zacks Rank #3.
Earnings ESP: Illumina has an Earnings ESP of +0.62%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Stocks Worth a Look
Here are a few medical stocks worth considering, as these have the right combination of elements to beat on earnings this reporting cycle.
Exact Sciences Corporation EXAS currently carries a Zacks Rank of 2 and has an Earnings ESP of +26.79%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Aphria Inc. APHA, carrying a Zacks Rank of 2 at present, has an Earnings ESP of +35.71%.
DexCom, Inc. DXCM is a Zacks #2 Ranked stock with an Earnings ESP of +143.90%.
Biggest Tech Breakthrough in a Generation
Be among the early investors in the new type of device that experts say could impact society as much as the discovery of electricity. Current technology will soon be outdated and replaced by these new devices. In the process, it’s expected to create 22 million jobs and generate $12.3 trillion in activity.
A select few stocks could skyrocket the most as rollout accelerates for this new tech. Early investors could see gains similar to buying Microsoft in the 1990s. Zacks’ just-released special report reveals 8 stocks to watch. The report is only available for a limited time.
See 8 breakthrough stocks now>>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Illumina, Inc. (ILMN) : Free Stock Analysis Report
DexCom, Inc. (DXCM) : Free Stock Analysis Report
Exact Sciences Corporation (EXAS) : Free Stock Analysis Report
Aphria Inc. (APHA) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research