It has been about a month since the last earnings report for Illumina (ILMN Quick QuoteILMN - Free Report) . Shares have lost about 9.3% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Illumina due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Illumina Surpasses Earnings Estimates in Q3

Illumina Inc. reported third-quarter 2024 adjusted earnings per share of $1.14, which beat the Zacks Consensus Estimate of 87 cents by a stupendous 31.0%. The bottom line was above the year-ago figure of 33 cents.

The adjustments exclude the impact of GRAIL’s pre-acquisition net operating losses on GILTI, the utilization of U.S. foreign tax credits, and the Pillar Two global minimum top-up tax, which became effective from the first quarter of 2024.

Including one-time items, the company’s GAAP earnings per share was $4.42 against the year-ago reported loss of $4.77 per share.

Core Illumina's GAAP earnings per share was $4.03 in the reported quarter.

Illumina’s Q3 Revenues

Revenues amounted to $1.08 billion, down 3.5% year over year (down 2% at CER). However, the top line beat the Zacks Consensus Estimate by 0.5%.

Illumina’s Segmental Details

Illumina has one reportable segment — Core Illumina.

Core Illumina revenues totaled $1.08 billion (down 2.3% year over year). This was primarily due to an increase in revenues from strategic partnerships and higher instrument service contract revenues on a growing install base.

Core Illumina sequencing service and other revenues totaled $150 million, up 6% year over year. Sequencing consumable revenues amounted to $741 million, up 7% year over year, primarily due to continued strong uptake in X consumables.

The company’s GRAIL segment was spun off on June 24, 2024. Hence, GRAIL has no reportable impact on the third-quarter top line.

Margin Performance

The adjusted gross margin (excluding amortization of acquired intangible assets) was 70.5%, up 514 basis points (bps) year over year.

Research and development expenses decreased 19.7% year over year to $253 million. SG&A expenses totaled $239 million, down 21.1% from the year-ago level. The adjusted operating profit in the quarter was $269 million, up 138% from $113 million in the corresponding period of 2023. The adjusted operating margin in the quarter expanded 1481 bps to 24.9%.

Financial Update

Illumina exited the third quarter with cash and cash equivalents of $869 million compared with $920 million at the end of the second quarter of 2024.

Cumulative net cash provided by operating activities at the end of the third quarter was $473 million compared with $254 million a year ago.

Illumina’s 2024 Guidance

Illumina updated its outlook for 2024.

The company has lowered its revenue guidance. It expects revenues to decrease approximately 3% year over year and 3% at CER.

ILMN raised its guidance for Core Illumina non-GAAP operating margin to 21-21.5% from the earlier projection of 20.5-21%.

Core Illumina non-GAAP diluted earnings per share is projected to be in the range of $4.05- $4.15 (up from the earlier estimation of $3.80-$3.95) in 2024. The Zacks Consensus Estimate for full-year EPS is currently pegged at $3.62.

Key Announcements

Throughout the third quarter, Illumina made headlines on many occasions. The company introduced the MiSeq i100 Series — the simplest, fastest benchtop sequencers. Illumina obtained FDA approval for TSO Comprehensive with two companion diagnostics to match patients to targeted therapies rapidly. The company also announced the opening of the Bengaluru global capability center.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

VGM Scores

Currently, Illumina has a great Growth Score of A, a grade with the same score on the momentum front. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Illumina has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Illumina belongs to the Zacks Medical - Biomedical and Genetics industry. Another stock from the same industry, Alkermes (ALKS Quick QuoteALKS - Free Report) , has gained 3.9% over the past month. More than a month has passed since the company reported results for the quarter ended September 2024.

Alkermes reported revenues of $378.14 million in the last reported quarter, representing a year-over-year change of -0.7%. EPS of $0.73 for the same period compares with $0.64 a year ago.

Alkermes is expected to post earnings of $0.82 per share for the current quarter, representing a year-over-year change of +70.8%. Over the last 30 days, the Zacks Consensus Estimate has changed +6.3%.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Alkermes. Also, the stock has a VGM Score of A.