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Why Is Illumina (ILMN) Down 12.2% Since Last Earnings Report?
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A month has gone by since the last earnings report for Illumina (ILMN - Free Report) . Shares have lost about 12.2% 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’s fourth-quarter fiscal 2019 adjusted earnings per share 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) earnings per share was $1.61, up 14.2% year over year.
For 2019, adjusted earnings per share was $6.57, up 14.9% from the year-ago figure. Also, the metric surpassed the consensus mark by 1.7%.
Revenues
In the reported quarter, 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’s 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 earnings per share 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 earnings per share 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.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision. The consensus estimate has shifted -20.09% due to these changes.
VGM Scores
Currently, Illumina has a nice Growth Score of B, a grade with the same score on the momentum front. Charting a somewhat similar path, 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 C. 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.
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Why Is Illumina (ILMN) Down 12.2% Since Last Earnings Report?
A month has gone by since the last earnings report for Illumina (ILMN - Free Report) . Shares have lost about 12.2% 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 Q4 Earnings Beat Estimates, Margins Expand
Illumina’s fourth-quarter fiscal 2019 adjusted earnings per share 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) earnings per share was $1.61, up 14.2% year over year.
For 2019, adjusted earnings per share was $6.57, up 14.9% from the year-ago figure. Also, the metric surpassed the consensus mark by 1.7%.
Revenues
In the reported quarter, 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’s 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 earnings per share 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 earnings per share 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.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision. The consensus estimate has shifted -20.09% due to these changes.
VGM Scores
Currently, Illumina has a nice Growth Score of B, a grade with the same score on the momentum front. Charting a somewhat similar path, 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 C. 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.