) reported fourth quarter 2012 adjusted earnings per share
("EPS") of 42 cents, beating the Zacks Consensus Estimate by a
penny and 2 cents above the year-ago adjusted EPS. Fiscal 2012
adjusted EPS remained at $1.59, surpassing the Zacks Consensus
Estimate of $1.57 and up 22.3% year-over-year. The fiscal EPS
reached the upper level of company-provided guidance range of
Revenues increased a robust 24% year over year to reach a
record height of $309 million during the quarter beating the
Zacks Comsensus Estimate of $306 million. For the full year,
total revenues were $1.15 billion, ahead of the Zacks Consensus
Estimate of $1.14 billion and up 9% year over year. The year's
result also outpaced the company's revenue guidance of
The quarter's impressive result was primarily on the back of
strong MiSeq instrument sales combined with increasing demand for
sequencing consumables of whole-genome services. The quarter's
revenues also included revenues of $7 million from the BlueGnome
acquisition (in Sep 2012).
During the quarter, there was a 21.1% increase in product
revenues to $278.9 million, and a 54.2% rise in service revenues
to $30.3 million. The company derives 90.2% of its total revenue
from products, while the remaining comes from services.
Product revenues are primarily attributed to the sale of
Microarrays and DNA Sequencing products. Product revenues consist
of sales proceeds from the Consumables and Instruments segment.
Services and other revenues comprise genotyping and sequencing
services as well as instrument maintenance contracts.
Consumable revenue (63.4% of the company's total revenue) was
$196 million, up 36% year over year, resulting from higher demand
of sequencing consumables and the impact of BlueGnome
acquisition. Instruments revenues were flat year over year to $80
million in the fourth quarter, as strong demand for MiSeq
benchtop instrumentswas offset by disappointing HiSeq shipments
(down year-over-year) and low demand for microarray
Earlier this month, Illumina entered into a definitive
agreement to acquire Verinata Health, Inc., a privately held
company dedicated to non-invasive tests for the early
identification of fetal chromosomal abnormalities. Under the
terms of the agreement, Illumina will purchase the latter for
$350 million along with an additional $100 million in milestone
payments through 2015. Illumina expects to finance the
transaction primarily with its cash in hand. The company also
acquired of Moleculo Inc. which will enable the introduction of
an innovative library prep method and analysis algorithm to
produce synthetic read lengths up to 10 Kb.
The company's adjusted gross margin (excluding the effect of
non-cash charges associated with stock based compensation and
amortization of intangible assets) stood at 68.5% in the reported
quarter, down 170 basis points (bps) year over year. Adjusted
operating margin during the quarter was 33.1% compared to 35.1%
in the year-ago quarter, down 200 bps due to lower gross margins
as well as higher SG&A expense.
Illumina exited the quarter with cash and cash equivalents and
short-term investment of $1.35 billion compared with $1.19
billion at the end of fiscal 2011. The company generated $79
million in cash flow from operations in the fourth quarter versus
$108 million in the prior-year period.
Based on its solid cash balance, Illumina repurchased shares
of $25 million under its earlier announced share repurchase
Illumina provided its fiscal 2013 outlook. The company
projected a 15% annualized revenue growth with EPS to remain in
the band of $1.55−$1.62 (considering the pending Verinata
acquisition). The Zacks Consensus Estimates for 2012 revenues and
EPS are $1.26 billion and $1.74, respectively. While the revenues
estimate remains within the guidance range, EPS estimate exceeds
the projected band.
Based in California, Illumina develops, manufactures, and
markets life science tools and integrated systems for the
analysis of genetic variation and function at a broader scale.
The company derives product revenues from the sale of microarrays
and DNA sequencing products.
As a life sciences tools company, Illumina has a track record
of innovation and operational excellence. The company primarily
Life Technologies Corporation
) in the sequencing market.
Currently, Illumina retains a short-term Zacks #3 Rank (Hold
Other Stocks to Consider
While we prefer to remain on the sidelines on Illumina, other
medical device stocks worth a look are
). Both the stocks carry a Zacks Rank #1 (Strong Buy).
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