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Anatomy of Success: Illumina (ILMN)

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The Zacks Rank has proven to be a valuable resource for experienced and beginning investors alike. This is because the model is simple; it identifies stocks that are poised to outperform the market over the next one to three months by harnessing the power of earnings estimates and earnings estimate revisions.

Following these estimate trends is the easiest way to track analyst sentiment and profit from improvements in a particular company’s near-term outlook. We believe our #1 (Strong Buy) picks are the strongest options based on this Zacks Rank model, and only about 5% of the several thousand companies we track earn this designation at one time.

In the story below, you will learn about one particular company that helped show the strength of the Zacks Rank. If investors had followed our ranking system when it flagged innovative biotech company, they would have witnessed massive profits.

Illumina, Inc. (ILMN - Free Report)

Illumina is a pioneer in the biotechnology industry, having helped reduce the cost of human genome sequencing significantly. The company operates as a developer and manufacturer of services which assist in the analysis of genetic variation and biological functions. These services are marketed toward research centers, government organizations, and other medical companies.

ILMN has been flagged by the Zacks Rank a number of times over the past year, starting with its first #2 (Buy) designation during the week of July 28, 2018. This position was earned as analysts became bullish on the company’s upcoming earnings report, which was published just a few days later. In that report, ILMN posted earnings of $0.82 per share, crushing the Zacks Consensus Estimate of $0.68.

The earnings momentum was only just getting going for ILMN, which would never dip below a #3 (Hold) before once again earning a #2 (Buy) again on Oct. 27. This designation came in the wake of another impressive earnings report for ILMN—this time one which saw impressive growth.

For this quarter, ILMN posted earnings of $1.11 per share, beating the Zacks Consensus Estimate by 13 cents and improving more than 14% from the year-ago period. Revenue for the quarter was $714 million, well ahead of estimates and up nearly 18% year over year.

This earnings and revenue success helped usher in an incredibly impressive stretch for ILMN, which saw its share prices and forward-looking EPS estimates move higher. Then, the company shocked investors in late April with quarterly earnings which beat consensus projections by nearly 50% and improved a staggering 126% from the prior-year quarter. ILMN has been holding a Zacks Rank #1 (Strong Buy) since then.

The below chart demonstrates the price performance for ILMN and 12-month forward EPS estimate (in red), starting from when the stock earned that first #2 (Buy) designation back in July.

As we can see, ILMN was a massive winner for those that followed the Zacks Rank. The stock has gained about 66% over the months listed in the chart above, including a solid 20% during its nearly two month run as a #1 (Strong Buy) recently. ILMN is yet another example of the predictive power of the Zacks Rank.

Want more market analysis from this author? Make sure to follow @Ryan_McQueeney on Twitter!

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