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Illumina Inc. (ILMN - Analyst Report) recently released its preliminary unaudited results for the fourth quarter of 2013. The company expects to report revenues of $387 million in the quarter, outshining the Zacks Consensus Estimate of $369 million. On a year-over-year basis, projected revenues should be up 25.2%. This outstanding forecast boosted a 6.6% uprise in the company’s share price at yesterday’s closing hours.

The company also assumes the adjusted earnings per share for the quarter to be slightly above the upper end of the guidance range. The Zacks Consensus Estimate for the fourth quarter remains at 31 cents. Illumina is expected to release its fourth quarter result by the end of Jan 2014.

While releasing the preliminary result for the fourth quarter, the company provided an outline for the next fiscal. Illumina expects a huge 15%−17% annualized revenue growth in fiscal 2014. The current Zacks Consensus Estimate for revenues for full year 2014 is pegged at $1.57 billion.

Moreover, Illumina anticipates earnings per share in the range of $2.00–$2.06. The Zacks Consensus Estimate of $2.04 remains within the guidance range. Illumina also expects full year adjusted gross margin of approximately 70% for 2014.

With the growing demand for Next Generation Sequencing (NGS) products in research and clinical development, Illumina should be able to continue with its growth momentum in the life science tools industry.

We note that, following a strong third quarter, Illumina had revised its outlook for full year 2013. The company expected revenue growth of 22% compared with 20% estimated earlier. Moreover, Illumina anticipated earnings per share for fiscal 2013 in the range of $1.75–$1.77 compared with the prior outlook of $1.68–$1.72. The current Zacks Consensus Estimate for EPS for fiscal 2013 remains at $1.77 on revenues of $1.40 billion.

Last Quarter Update

Illumina had retained its impressive performance in the third quarter as well, beating our EPS estimate for four successive quarters. The company derived 89.3% of its total revenue from products while the remaining came from services.

Top-line growth was driven by strong worldwide demand for products and solid contributions from the sequencing business. Organic revenues registered an increase of 20% year over year, owing to strong demand for sequencing consumables and consistent sales growth of HiSeq instruments.

Growth in Consumables is attributable to robust demand for Sample Prep, sequencing consumables and BlueGnome. Sequencing consumables were driven by high sales of HiSeq instrument and increase in HiSeq and MiSeq installed base.

During the third quarter, Illumina entered into a three-year agreement with Natera to supply the HiSeq 2500 sequencing system and associated consumables for non-invasive prenatal testing.

Moreover, in October, Illumina signed an agreement to acquire Santa Clara-based NextBio, a leader in clinical and genomic informatics. With the acquisition of NextBio, it will be able to offer customers, enterprise level bioinformatics solutions to customers.

The stock currently carries a Zacks Rank #3 (Hold). While we choose to remain on the sidelines regarding Illumina at present, better-ranked medical stocks worth considering include Cepheid (CPHD - Analyst Report), CryoLife Inc. (CRY - Snapshot Report) and AngioDynamics Inc. (ANGO - Analyst Report). While Cepheid and CryoLife sport a Zacks Rank #1 (Strong Buy), AngioDynamics carries a Zacks Rank #2 (Buy).

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