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Illumina (ILMN) to Report Q2 Earnings: What's in the Offing?

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Illumina, Inc. (ILMN - Free Report) is slated to release second-quarter 2020 results on Aug 6, after market close. In the last-reported quarter, the company’s earnings of $1.64 surpassed the Zacks Consensus Estimate by 30.2%. Over the trailing four quarters, its earnings outperformed the Zacks Consensus Estimate on all occasions, the average beat being 19.30%.

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

Factors at Play

Illumina, which has a strong international presence, is likely to have been affected by the continued lockdowns in several nations to control the spread of coronavirus during the second quarter. This is because such restrictions have postponed non-emergency and elective healthcare healthcare activities.

It is to be noted that the company’s first-quarter 2020 results were strong overall. According to the company, in the quarter, strong sequencing consumable revenues more than offset the coronavirus-led disruption on its system sales.

Illumina, Inc. Price and EPS Surprise

 

Illumina, Inc. Price and EPS Surprise

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

Here we take a look at the company’s core segments and how they might have performed in Q2.

Sequencing Products

At April-end, Illumina confirmed that although operations in China were disrupted by the pandemic, it witnessed increase in run volumes in March and April. The company also stated that after the lower-than-expected performance of the sequencing systems and consumables in China, Illumina witnessed the gradual return of research and clinical customers to laboratories and thus scaling up of their operations. This trend is likely to have continued through the quarter as well, boosting the top line.

For the past few months, Illumina has been registering lower growth in its sequencing portfolio primarily due to pandemic-led business disruptions. System shipments were down across all families, including NextSeq 2000. This is likely to have continued through the second quarter.

However, the Sequencing consumable segment has performed impressively over the past few months. The company expects that NovaSeq pull-through per system, which was high in the first quarter, to have maintained the level in the second quarter. However, softness within the DTC (direct-to-consumer) market is expected to have dented the company’s array business in the second quarter, as was the case in the last-reported quarter.

However, Illumina is upbeat about the accelerating adoption of comprehensive genomic profiling and the next-generation sequencing tests. Notably, the company received the FDA’s Emergency Use Authorization for its COVIDSeq Test in June, which is a high-throughput sequencing-based in vitro diagnostic (IVD) workflow enabling the detection of SARS-CoV-2. This is likely to have boosted the company’s top line as well.

The pausing of sequencing work by the UK Biobank since March is likely to have impacted Illumina’s top line.

Pull-through for both MiSeq and our NextSeq 500 and 550 was flat in the first quarter and MiniSeq was below its targeted pull through range. This trend is unlikely to have changed in the second quarter, given the widespread business disruptions.

Sequencing Service

The Sequencing Services portfolio has been registering an uptick in revenues on higher IVD licensing over the past few months. However, oncology development revenues are expected to have dropped due to stay-at-home orders and patients’ deferral of appointments.

The Zacks Consensus Estimate for second-quarter total sequencing revenues is pegged at $627 million, suggesting a decline of 13.9% year over year.

Q2 Estimates

The Zacks Consensus Estimate for total revenues of $678.9 million suggests a fall of 18.9% from the prior-year quarter’s figure.

The consensus mark for earnings of 72 cents per share indicates a 46.7% 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:

Zacks Rank: The company currently carries a Zacks Rank #3.

Earnings ESP: Illumina has an Earnings ESP of -6.39%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

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.

Integra LifeSciences Holdings Corporation (IART - Free Report) has an Earnings ESP of +20.69% and it currently carries a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Luminex Corporation (LMNX - Free Report) has an Earnings ESP of +82.61% and it has a Zacks Rank of 2 at present.

IDEXX Laboratories, Inc. (IDXX - Free Report) has an Earnings ESP of +18.14% and is a Zacks #2 Ranked stock.

5 Stocks Set to Double

Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.

Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.

Today, See These 5 Potential Home Runs >>

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