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Illumina Inc. (ILMN - Free Report) reported adjusted earnings per share (EPS) of 85 cents in the fourth quarter of 2016, which exceeded the Zacks Consensus Estimate by 4.9%. Adjusted earnings also improved from the year-ago number by 4.9%.
However, full-year 2016 adjusted EPS came in at $3.33, which missed the Zacks Consensus estimate by 0.3%.
Higher revenue growth and lower expenses primarily drove Illumina’s bottom line in fourth-quarter 2016. Moreover, the quarterly adjusted EPS included a dilution of 5 cents and 3 cents from the company’s GRAIL and Helix investment, respectively.
Including one-time items, the company reported earnings of 84 cents per share, reflecting a solid year-over-year improvement of 20%.
Full-year 2016 reported EPS came in at $3.33, down 0.9% year over year.
In the reported quarter, Illumina's revenues grew 4.6% year over year to $619.3 million, exceeding the company’s earlier expectation of flat to a slight improvement in revenues from the third quarter’s $278.6 million. Moreover, the top line exceeded the Zacks Consensus Estimate of $616 million by 0.5%.
Full-year 2016 revenues came in at $2.39 billion, up 8% year over year but below the Zacks Consensus Estimate of $2.40 billion.
Per management, growth in sequencing consumables and strong demand from microarrays primarily supported the top line, offset by a decline in sequencing instruments.
Revenues by Business Categories
Product revenues (84.8% of total revenue) increased 5.5% year over year to $525.5 million. Within this business, revenues from consumables were up 20% at $331 million on the back of solid growth in sequencing consumable revenues driven by growing installed base of instruments and strength in HiSeq X and NextSeq consumables.
Service and Other (15.2%) revenues remained flat year over year at $93.7 million. Strength in genotyping services and sequencing instrument maintenance contracts was partially offset by expectations of a decline in NIPT service revenues, given customer migration to in-house testing.
Operational Update
Illumina's adjusted gross margin (considering stock-based compensation as regular expense) came in at 69.9%, reflecting a contraction of 180 basis points (bps) year over year, owing to higher investment in sequencing consumable and array manufacturing capacity as well as clinical capabilities, partially offset by favorable consumable mix.
Adjusted research and development (R&D) expenses were up 16.5% year over year to $120.5 million and adjusted selling, general & administrative (SG&A) expenses rose 4.8% to $129.6 million. Consequently, the adjusted operating margin of 29.5% reflected a decline of a stupendous 390 bps from the year-ago period due to increased investment in manufacturing, head count and GRAIL and Helix.
Financial Update
Illumina exited the fiscal 2016 with cash and cash equivalents and short-term investments of $1.55 billion, up from $1.38 billion in the prior year. The company generated $280 million in cash flow from operations in 2016, compared with $240 million a year ago.
2017 Guidance
For 2017, Illumina expects revenue growth in the range of 10%–12%. On the bottom-line front, the company projects adjusted EPS in the band of $3.60–$3.70. The current Zacks Consensus Estimate for Illumina’s 2016 bottom line is pegged at $3.67, within the guided range. GRAIL dilution for the first quarter of 2017 is expected at around 8 cents. Helix dilution is estimated at roughly 18 cents for the full year.
For the first quarter of 2017, Illumina projects revenues in the band of $580–$595 million. The current Zacks Consensus Estimate for first-quarter revenues is pegged at $626.4 million, above the guided range. The company expects adjusted EPS in the range of 60–65 cents.
Our Take
Illumina ended the fourth quarter on an impressive note with both earnings and revenues beating the Zacks Consensus Estimate. The strong performance was on account of robust performance across sequencing consumables and microarrays portfolios. The company also made significant progress on key R&D programs by launching sequencing solution NovaSeq and several other such solutions during the reported quarter.
Geographically, the company performed well in the Asia Pacific and Europe. However, revenues in the Americas witnessed slower pace of growth primarily due to lower high throughput sequencing instrument shipments. Moreover, the rise in operating expenses adds to the concerns.
Zacks Rank & Key Picks
Illumina currently has a Zacks Rank #3 (Hold). Better-ranked medical stocks are Glaukos Corporation (GKOS - Free Report) , Cardiovascular Systems and Neogen Corp. (NEOG - Free Report) . Glaukos sports a Zacks Rank #1 (Strong Buy) while Cardiovascular Systems and Neogen carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Glaukos gained over 100% in the last one year in comparison to the S&P 500’s gain of only 19.7%. The company has a stellar four-quarter average earnings surprise of over 100%.
Cardiovascular Systems surged over 100% in the last one year in comparison to the S&P 500. It has a four-quarter average earnings surprise of 67.8%.
Neogen gained 26.0% in the past one year, better than the S&P 500 mark. The stock has an impressive long-term earnings growth of 16.7% for the next five years compared to the industry average of 15.2%.
Zacks' Top 10 Stocks for 2017
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Who wouldn't? As of early December, the 2016 Top 10 produced 5 double-digit winners including oil and natural gas giant Pioneer Natural Resources which racked up a stellar +50% gain. The new list is painstakingly hand-picked from 4,400 companies covered by the Zacks Rank. Be among the very first to see it>>
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Illumina (ILMN) Beats Q4 Earnings & Revenues, Guides 2017
Illumina Inc. (ILMN - Free Report) reported adjusted earnings per share (EPS) of 85 cents in the fourth quarter of 2016, which exceeded the Zacks Consensus Estimate by 4.9%. Adjusted earnings also improved from the year-ago number by 4.9%.
However, full-year 2016 adjusted EPS came in at $3.33, which missed the Zacks Consensus estimate by 0.3%.
Higher revenue growth and lower expenses primarily drove Illumina’s bottom line in fourth-quarter 2016. Moreover, the quarterly adjusted EPS included a dilution of 5 cents and 3 cents from the company’s GRAIL and Helix investment, respectively.
Including one-time items, the company reported earnings of 84 cents per share, reflecting a solid year-over-year improvement of 20%.
Full-year 2016 reported EPS came in at $3.33, down 0.9% year over year.
Illumina, Inc. Price, Consensus and EPS Surprise
Illumina, Inc. Price, Consensus and EPS Surprise | Illumina, Inc. Quote
Revenues
In the reported quarter, Illumina's revenues grew 4.6% year over year to $619.3 million, exceeding the company’s earlier expectation of flat to a slight improvement in revenues from the third quarter’s $278.6 million. Moreover, the top line exceeded the Zacks Consensus Estimate of $616 million by 0.5%.
Full-year 2016 revenues came in at $2.39 billion, up 8% year over year but below the Zacks Consensus Estimate of $2.40 billion.
Per management, growth in sequencing consumables and strong demand from microarrays primarily supported the top line, offset by a decline in sequencing instruments.
Revenues by Business Categories
Product revenues (84.8% of total revenue) increased 5.5% year over year to $525.5 million. Within this business, revenues from consumables were up 20% at $331 million on the back of solid growth in sequencing consumable revenues driven by growing installed base of instruments and strength in HiSeq X and NextSeq consumables.
Service and Other (15.2%) revenues remained flat year over year at $93.7 million. Strength in genotyping services and sequencing instrument maintenance contracts was partially offset by expectations of a decline in NIPT service revenues, given customer migration to in-house testing.
Operational Update
Illumina's adjusted gross margin (considering stock-based compensation as regular expense) came in at 69.9%, reflecting a contraction of 180 basis points (bps) year over year, owing to higher investment in sequencing consumable and array manufacturing capacity as well as clinical capabilities, partially offset by favorable consumable mix.
Adjusted research and development (R&D) expenses were up 16.5% year over year to $120.5 million and adjusted selling, general & administrative (SG&A) expenses rose 4.8% to $129.6 million. Consequently, the adjusted operating margin of 29.5% reflected a decline of a stupendous 390 bps from the year-ago period due to increased investment in manufacturing, head count and GRAIL and Helix.
Financial Update
Illumina exited the fiscal 2016 with cash and cash equivalents and short-term investments of $1.55 billion, up from $1.38 billion in the prior year. The company generated $280 million in cash flow from operations in 2016, compared with $240 million a year ago.
2017 Guidance
For 2017, Illumina expects revenue growth in the range of 10%–12%. On the bottom-line front, the company projects adjusted EPS in the band of $3.60–$3.70. The current Zacks Consensus Estimate for Illumina’s 2016 bottom line is pegged at $3.67, within the guided range. GRAIL dilution for the first quarter of 2017 is expected at around 8 cents. Helix dilution is estimated at roughly 18 cents for the full year.
For the first quarter of 2017, Illumina projects revenues in the band of $580–$595 million. The current Zacks Consensus Estimate for first-quarter revenues is pegged at $626.4 million, above the guided range. The company expects adjusted EPS in the range of 60–65 cents.
Our Take
Illumina ended the fourth quarter on an impressive note with both earnings and revenues beating the Zacks Consensus Estimate. The strong performance was on account of robust performance across sequencing consumables and microarrays portfolios. The company also made significant progress on key R&D programs by launching sequencing solution NovaSeq and several other such solutions during the reported quarter.
Geographically, the company performed well in the Asia Pacific and Europe. However, revenues in the Americas witnessed slower pace of growth primarily due to lower high throughput sequencing instrument shipments. Moreover, the rise in operating expenses adds to the concerns.
Zacks Rank & Key Picks
Illumina currently has a Zacks Rank #3 (Hold). Better-ranked medical stocks are Glaukos Corporation (GKOS - Free Report) , Cardiovascular Systems and Neogen Corp. (NEOG - Free Report) . Glaukos sports a Zacks Rank #1 (Strong Buy) while Cardiovascular Systems and Neogen carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Glaukos gained over 100% in the last one year in comparison to the S&P 500’s gain of only 19.7%. The company has a stellar four-quarter average earnings surprise of over 100%.
Cardiovascular Systems surged over 100% in the last one year in comparison to the S&P 500. It has a four-quarter average earnings surprise of 67.8%.
Neogen gained 26.0% in the past one year, better than the S&P 500 mark. The stock has an impressive long-term earnings growth of 16.7% for the next five years compared to the industry average of 15.2%.
Zacks' Top 10 Stocks for 2017
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2017?
Who wouldn't? As of early December, the 2016 Top 10 produced 5 double-digit winners including oil and natural gas giant Pioneer Natural Resources which racked up a stellar +50% gain. The new list is painstakingly hand-picked from 4,400 companies covered by the Zacks Rank. Be among the very first to see it>>