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Bear of the Day: Illumina (ILMN)

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Illumina (ILMN - Free Report) is a life sciences company that offers tools and integrated systems for genetic variation analysis. The company also provides innovative sequencing- and array-based solutions for genotyping, copy number variation analysis, methylation studies, and gene expression profiling of DNA and RNA.

Q2 Earnings Disappoint Wall Street

Illumina reported second quarter financial numbers last month, and results fell short of expectations. ILMN dropped as much as 13% the day of its earnings release.

Revenue of $633 million declined 25% year-over-year, though this is what analysts had been anticipating. Non-GAAP earnings were $0.62 per share, missing analysts’ expectations.

R&D expenses were $155 million for the quarter.

Cash flow from operations, however, improved over the prior-year period to $240 million; free cash flow was $202 million, also improving year-over-year.

"As expected, the second quarter was significantly impacted by pandemic-related disruption in our customers' operations and was particularly challenging for many of our research customers who remain closed or operating at limited scale,” said CEO Francis deSouza.

ILMN withdrew its full-year fiscal 2020 guidance earlier this year, and uncertainty around the coronavirus pandemic still remains.

Bottom Line

ILMN is now a Zacks Rank #5 (Strong Sell).

Seven analysts cut their full year earnings outlook over the past 60 days, and the consensus estimate has fallen well over one dollar to $4.39 per share; earnings are expected to decline about 33% for fiscal 2020.

Shares have actually gained more than 44% since the March lows, but ILMN still lags the S&P 500’s 55+% rebound during the same time frame.

ILMN will likely have a long, hard road ahead of it, since the Covid-19 crisis will continue to be a growth obstacle for a while now. But, the broader genome sequencing market has huge growth opportunities, and Illumina could be poised for a big rebound once the pandemic subsides.

Investors who are interested in adding a medical peer to their portfolio could consider scientific instrument maker Thermo Fisher Scientific (TMO - Free Report) . TMO is a #2 (Buy) on the Zacks Rank, and shares have jumped almost 58% since mid-March.

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