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Illumina (ILMN) to Report Q3 Earnings: What's in the Offing?

Zacks Equity Research
·5 min read

Illumina, Inc. ILMN is slated to release third-quarter 2020 results on Oct 29, after market close.

In the last-reported quarter, the company’s earnings of 62 cents lagged the Zacks Consensus Estimate by 13.9%. Over the trailing four quarters, its earnings outperformed the Zacks Consensus Estimate on three occasions and missed in one, the average beat being 15.26%.

Let's discuss the factors that are likely to have impacted its performance in the quarter.

Factors at Play

Sequencing Products

Illumina, during its second-quarter earnings call in early August, had confirmed that its top line was hampered due to prolonged closures and reduced operations at research laboratories along with temporary reallocation of resources to polymerase chain reaction testing for COVID-19. Further, the company also apprehended that the impact of the extended closures or reduced operations at some universities and research institutes might continue in the third quarter as well. This is likely to have weighed on the company's quarterly performance.

However, it is encouraging to note that the clinical business has been resilient despite the pandemic-led challenges, driven by reproductive health, per the company. Oncology testing was still below pre-COVID-19 levels, but improving. With the economy gradually returning to normal, these trends are expected to have continued during the third quarter as well, thus boosting the top line.

Illumina, Inc. Price and EPS Surprise

 

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

Illumina, Inc. price-eps-surprise | Illumina, Inc. Quote

Illumina’s Sequencing consumable segment had already performed impressively in the second quarter. And over the past few months, the sequencing consumable run rates have been improving and sequencing system placements are increasing including higher NovaSeq shipments. Notably, the NextSeq 2000, MiSeq and MiniSeq shipments have been robust over the past few months. We expect the momentum to have continued during the third quarter as well, thus driving third-quarter revenues.

The launch of NovaSeq 6000 v1.5 Reagent Kit in August to make whole genome sequencing more accessible and affordable for labs of all sizes is likely to have boosted the company’s third-quarter revenues as well.

Illumina’s TruSight Software Suite, launched in July to accelerate and facilitate the adoption of whole-genome sequencing, is likely to have contributed to the third quarter revenues. Also, the company is upbeat about the accelerating adoption of comprehensive genomic profiling and the next-generation sequencing tests. Notably, the robust customer adoption of its COVIDSeq Test (which is a high-throughput sequencing-based in vitro diagnostic or IVD workflow enabling the detection of SARS-CoV-2) is likely to have further driven the company’s top line.

However, softness within the DTC (direct-to-consumer) market is expected to have dented the company’s array business in the third quarter, as was the case in the last-reported quarter.

Sequencing Service

The Sequencing Services portfolio has been registering a fall in revenues on lower IVD licensing over the past few months. Further, oncology development revenues are expected to remain depressed during the third quarter due to stay-at-home orders and patients’ deferral of appointments.

The Zacks Consensus Estimate for third-quarter total sequencing revenues is pegged at $656 million, suggesting a decline of 18.5% year over year.

Q3 Estimates

The Zacks Consensus Estimate for third-quarter revenues of $720.8 million suggests a fall of 20.5% from the prior-year quarter’s figure.

The consensus mark for third-quarter earnings of 77 cents per share indicates a 60.1% 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. However, this is not the case here as you can see:

Earnings ESP: Illumina has an Earnings ESP of +2.11%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: The company currently carries a Zacks Rank #4 (Sell).

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.

Cardinal Health, Inc. CAH has an Earnings ESP of +1.70% and it currently carries a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

IDEXX Laboratories, Inc. IDXX has an Earnings ESP of +0.35% and is a Zacks #2 Ranked stock.

Quidel Corporation QDEL has an Earnings ESP of +8.14% and it flaunts a Zacks Rank of 1 at present.

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Illumina, Inc. (ILMN) : Free Stock Analysis Report
 
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IDEXX Laboratories, Inc. (IDXX) : Free Stock Analysis Report
 
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