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Illumina (ILMN) Q4 Earnings Beat Estimates, Margins Expand

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Illumina, Inc.’s (ILMN - Free Report) fourth-quarter fiscal 2019 adjusted earnings per share (EPS) of $1.70 surpassed the Zacks Consensus Estimate by 6.9%. Moreover, the bottom line improved 28.8% from the year-ago quarter.

Including one-time items, the company’s GAAP (reported) EPS was $1.61, up 14.2% year over year.

For 2019, adjusted EPS was $6.57, up 14.9% from the year-ago figure. Also, the metric surpassed the consensus mark by 1.7%.

Illumina, Inc. Price, Consensus and EPS Surprise

 

Illumina, Inc. Price, Consensus and EPS Surprise

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


Revenues

In the quarter under review, Illumina’s revenues rose 9.9% year over year to $953 million. The top line also surpassed the Zacks Consensus Estimate by 0.6%. The year-over-year improvement can be attributed to the company’s sequencing consumable growth and stronger-than-expected IVD partnership and non-DTC array revenues.

For fiscal 2019, total revenues were $3.54 billion, up 6.3% from the year-ago figure. Moreover, it was in line with the Zacks Consensus Estimate.

Segment Details

The Sequencing consumable subsegment revenues were $572 million in the reported quarter, up 21.7% year over year. The Sequencing systems subsegment revenues were $141 million, down by 12.4% from the year-ago quarter figure. Sequencing revenues, a subsegment of the Service & Other segment, were $124 million, up 19.2% from the year-ago quarter.

In the fourth quarter of fiscal 2019, HiSeq consumables declined on customers’ transition to NovaSeq. Nevertheless, the overall high throughput consumables portfolio witnessed sequential and year-over-year growth. NextSeq shipments were lower than expected due to customer timing in the fourth quarter. The same witnessed sequential and year-over-year growth on the placement of record number of NextSeq Dx Systems in the quarter.

Margins

Gross margin (excluding the amortization of acquired intangible assets) was 70.2% in the reported quarter, up 110 basis points (bps) year over year.

Research and development expenses declined 8.5% year over year to $161 million, and selling, general & administrative expenses rose 7.4% to $233 million. Adjusted operating margin came in at 31%, reflecting a massive surge of 670 bps year over year.

Financial Update

Illumina exited the fourth quarter of fiscal 2019 with cash and cash equivalents plus short-term investments of $3.41 billion compared with $3.17 million at the end of fiscal 2018.

In fiscal 2019, net cash provided by operating activities was $1.05 billion compared with $1.14 billion reported in the year-ago quarter.

Fiscal 2020 Guidance

Illumina issued fiscal 2020 guidance. The company expects adjusted revenues of $3.86-3.93 billion for the year, suggesting 9-11% growth. The Zacks Consensus Estimate for revenues stands at $3.90 billion, which is closer to the upper end of the company’s guided range.

Illumina envisions adjusted EPS of $6.80-$7 for fiscal 2020. The consensus mark for the metric is pinned at $6.99, which is close to the high end of the company’s guidance.

For first-quarter fiscal 2020, Illumina anticipates adjusted revenues of $850-$855 million. The consensus estimate for revenues stands at $907.2 million, above the company’s projected range.

Adjusted EPS is estimated at $1.20-1.25 for first-quarter fiscal 2020. The Zacks Consensus Estimate for the same is pegged at $1.55, above the company’s expected range.

Our Take

Illumina exited the fourth quarter of fiscal 2019 on an impressive note, with better-than-expected earnings and revenue figures. It is encouraging to note that top-line growth was witnessed across the company’s high and mid throughput categories. Non-DTC array revenues were also contributed significantly to the top line.

Illumina continues to witness robust performance across a broad range of sequencing applications, especially in the sequencing consumables segment. The expansion in the company’s capabilities, resulting from partnerships with QIAGEN and Adaptive Biotechnologies regarding IVD test kits, buoys optimism.

On the flip side, a year-over-year decline in research and development costs, and lower system revenues in the low throughput category, resulting from a weak performance by MiniSeq, were headwinds.

Zacks Rank & Stocks to Consider

Illumina currently carries a Zacks Rank #4 (Sell).

Some better-ranked stocks in the broader medical space are SeaSpine Holdings Corporation (SPNE - Free Report) , STERIS plc (STE - Free Report) and DexCom, Inc. (DXCM - Free Report) , all currently carrying a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for SeaSpine’s fourth-quarter 2019 revenues is pegged at $43.6 million, suggesting 14.7% growth from the prior-year reported figure. The same for loss per share is anticipated at 44 cents, implying a 16.9% improvement from the year-ago reported number.

The Zacks Consensus Estimate for STERIS’s third-quarter fiscal 2020 revenues is pegged at $749.7 million, hinting at a 7.7% increase from the year-earlier reported figure. The same for adjusted earnings per share stands at $1.43, indicating a 13.5% rise from the year-ago reported figure.

The Zacks Consensus Estimate for DexCom’s fourth-quarter 2019 revenues is pegged at $457 million, suggesting 35.2% growth from the prior-year reported figure. The same for adjusted earnings per share stands at 72 cents, implying a 33.3% improvement from the year-earlier reported figure.

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