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Can Sequencing Products Drive Illumina's (ILMN) Q2 Earnings?

Zacks Equity Research

Illumina, Inc. ILMN is slated to release second-quarter 2019 results on Jul 29, after market close. In the last reported quarter, the company reported a positive earnings surprise of 19.40%. The company generated better-than-expected earnings in three of the trailing four quarters, the average beat being 16.72%.

Let's see how things are shaping up prior to this announcement.

Key Catalysts

Sequencing Products

Over the last few quarters, Illumina’s product revenues have been rising on strong demand for sequencing and array systems as well as consumables. In the last reported quarter, the company registered double-digit consumables growth in its sequencing portfolio with an uptrend in all throughput categories. The trend is expected to continue in the yet-to-be-reported quarter.

Despite the ongoing customers’ transition from HiSeq consumables to NovaSeq, the company’s second-quarter 2019 results are expected to gain from the high throughput suite. Within the mid throughput sequencing consumables, the company is registering strong shipment revenues from NextSeq. With more customers adopting the system primarily for Non-Invasive Prenatal Test and oncology applications, it is expected to have performed well in the second quarter.

Illumina, Inc. Price and EPS Surprise


Illumina, Inc. Price and EPS Surprise

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

Lately, the company has been working to ship several refurbished HiSeq 4000s. HiSeq’s affordability and accessibility offered support to customers across a wide array of applications, including on-target CRISPR screening, environmental DNA sequencing and 16S sequencing.

The company’s desktop suite, which constitutes of the NextSeq and HiSeq consumables, is delivering solid results of late. NextSeq and MiSeq placements are also strong with the NextSeq upside being driven by strong demand for TSO500. We expect these trends to reflect in the results of the to-be-reported quarter.

Illumina started shipping the S prime flow cell in February and we are upbeat about the strong demand for this product in the second quarter. We expect NovaSeq shipments to rise significantly over the upcoming quarters.

Meanwhile, the portfolio of Sequencing Systems and Consumables has been showing great promise of late, courtesy of robust performance in international markets of Middle East, Africa and Russia and China.

In Europe, VeriSeq NIPT has been delivering impressively as the CE-IVD VeriSeq NIPT offerings sequenced more than 100,000 samples in the last reported quarter. We expect this development to contribute to the top line in the second quarter.

The Zacks Consensus Estimate for Product revenues is pegged at $715 million, calling for an increase of 6.24% from the year-ago quarter.

Sequencing Service

The portfolio of Sequencing Services is currently registering strong revenue growth, thanks to the GeL technology. Population genomics are expected to contribute to the top line in the to-be-reported quarter. The company has been undertaking around 50 global initiatives and expects several of these to yield encouraging results in 2019.

The Zacks Consensus Estimate for Service and other revenues is pegged at $159 million, suggesting an increase of 1.27% from the year-earlier quarter.

Which Way Are Estimates Treading?

The Zacks Consensus Estimate for total revenues of $835.2 million implies growth of 0.63% from the prior-year quarter’s reported figure. Also, the consensus mark for earnings of $1.32 indicates a 7.69% decline from the year-ago quarter's reported figure.

What Our Quantitative Model Predicts

Per our model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has high chances of beating estimates if it also has a positive Earnings ESP. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Illumina has a Zacks Rank #5 (Strong Sell) as well as an Earnings ESP of -1.52%, which doesn't suggest earnings beat this season.

Stocks Worth a Look

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

AmerisourceBergen ABC has an Earnings ESP of +0.82% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

DENTSPLY SIRONA XRAY has an Earnings ESP of +6.95% and a Zacks Rank #1.

Amedisys, Inc. AMED has an Earnings ESP of +1.91% and a Zacks Rank #1.

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