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Why is Illumina (ILMN) Up 13.5% Since Its Last Earnings Report?

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A month has gone by since the last earnings report for Illumina, Inc. (ILMN - Free Report) . Shares have added about 13.5% in that time frame.

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

Recent Earnings

Illumina reported adjusted earnings per share (EPS) of $1.45 in the first quarter of 2018, beating the Zacks Consensus Estimate of $1.22 by 40.8%. Also, the bottom line exceeded the year-ago number by a stupendous 126.6%.
Including one-time items, the company reported EPS of $1.41 compared with $2.48 a year ago. The year-ago figure included the impact of a pre-tax gain of $453 million as a result of the GRAIL repurchase of shares from Illumina.

Revenues

In the quarter under review, Illumina's revenues surged 30.8% year over year to $782 million. The top line surpassed the Zacks Consensus Estimate by 5.2%. This huge upside can be attributed to strong consumables growth across Illumina’s sequencing portfolio with notable strength in high throughput family. Moreover, the NovaSeq platform continued the growth momentum. Excluding the $19-million stocking order in fourth-quarter 2017, NovaSeq consumables soared approximately 60% sequentially with a strong performance from both the S2 and S4 flow cells.

While Product revenues (80.3% of total revenues) increased 27.9% year over year to $628 million, Service and Other (19.7%) revenues were up 43.9% year over year to $154 million.

Operational Update

Adjusted gross margin (excluding amortization of acquired intangible assets and including stock-based compensation expenses) came in at 69.8%, reflecting an expansion of 340 basis points (bps) year over year owing to a favorable product mix within sequencing consumables. Also, microarrays contributed 19% of overall revenues in the reported quarter as compared to 16% a year ago.

While research and development expenses declined 5.5% year over year to $137 million, selling, general & administrative expenses rose 7.01% to $183 million. The adjusted operating margin of 28.9% expanded 1837 bps from the year-ago quarter.

Financial Update

Illumina exited the first quarter with cash and cash equivalents plus short-term investments of $2.37 billion, up from $2.15 billion last year. Net cash provided by operating activities as of Mar 31, 2018 was $255 million compared with $168 million as of Mar 31, 2017.

2018 Guidance

For 2018, the company projects 15-16% revenue growth, GAAP earnings per share attributable to Illumina stockholders of $4.45-$4.55 and non-GAAP earnings attributable to Illumina stockholders of $4.75-$4.85.

Illumina has raised its full-year revenues 15-16% as compared to the earlier projection of 13-14% rise. Meanwhile, the Zacks Consensus Estimate for the metric is pegged at $3.14 billion.

Adjusting for certain net specified items for the full year, the EPS is expected in the band of $4.75-$4.85, a raise from the earlier forecast of $4.50-$4.60. The consensus mark for the metric stands at $4.60, below the predicted range.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates flatlined during the past month. There have been three revisions higher for the current quarter compared to three lower.

Illumina, Inc. Price and Consensus

 

Illumina, Inc. Price and Consensus | Illumina, Inc. Quote

VGM Scores

At this time, ILMN has a strong Growth Score of A, though it is lagging a lot on the momentum front with a D. The stock was also allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

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

The company's stock is suitable solely for growth based on our styles scores.

Outlook

ILMN has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.




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