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Can Solid Consumables Drive Illumina's (ILMN) Q4 Earnings?


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Illumina, Inc. ILMN is slated to report fourth-quarter 2018 results, after the market closes on Jan 29. In the las t report ed quarter, the company delivered a positive earnings surprise of 21.6%, the average trailing four-quarter beat being 27.3%.

Let's see how things are shaping up prior to this announcement.

Key Catalysts

Over the last few quarters, Illumina's product revenues have been gaining traction from rising demand for sequencing consumables and instruments plus the microarray range. In the last reported quarter, the company saw strong consumables growth across its sequencing portfolio with an uptick in all throughput categories. Despite the ongoing customers' transition from HiSeq consumables to NovaSeq, the company is expected to gain from this high throughput family in the fourth quarter as well.

Illumina, Inc. Price and EPS Surprise

Illumina, Inc. Price and EPS Surprise | Illumina, Inc. Quote

Within consumables, the NovaSeq platform witnesses steady growth on the back of a strong S4 flow cell,representing the largest revenue contributor across the entire high throughput family of flow cells. Management is bullish about experiencing impressive demand across the NovaSeq portfolio that also includes the S2 and S1 flow cells.

From the mid throughput consumables, NextSeq is expected to perform well with many customers adopting the system as their primary workhorse for NIPT (Non Invasive Prenatal Test) and oncology applications. The low throughput family is also projected to show an improved performance with pull-through for both MiSeq and MiniSeq within the respective ranges.

Within Sequencing Systems, the last reported quarter witnessed highest revenue contribution from NovaSeq with stable ASP trends. The company believes that the NovaSeq upgrade cycle will span multiple years. Management is accordingly continuing to target 330-350 NovaSeq shipments for the full year. This should get reflected in the fourth quarter itself.

Evidently, the Zacks Consensus Estimate for Product revenues is pegged at $715 million, depicting an increase of 15.1% from the year-ago quarter.

Total Services and other revenues, which include genotyping and sequencing services, instrument maintenance contracts and revenues from oncology agreements, have been improving. This upside is driven by sturdy genotyping services, courtesy of sequencing instrument maintenance contracts and solid consumer demand.

In this area, the company envisions consistent development, banking on multiple progresses that should enable genomics to carry on with the advancement from research to the clinic and over time, the standard-of-care. In this regard, the company joined Memorial Sloan Kettering Cancer Center during the second half of 2018 to identify genomic biomarkers, which predict response to immunotherapy using whole exome and whole genome sequencing. Additionally, Illumina collaborated with BMS on tumor mutational burden.

Moreover, the company is thriving on NIPT adoption, backed by a constant uptake of VeriSeq NIPT Solution, which includes CE-IVD marked library prep and analysis software. Countries like the Netherlands and Denmark have already started covering this test followed by England and France. The company continues to see positive reimbursement trends in Europe as well. While the Netherlands program is in preliminary stages of its ramp, it is expected to more than double VeriSeq sales in 2018.

The worldwide upbeat reimbursement trend is anticipated to boost Illumina's fourth-quarter top line as well. The Zacks Consensus Estimate for Service and other revenues stands at $148 million, representing a rise of 24.4% from the year-earlier quarter.

Overall, fourth-quarter total revenues are projected to be $863.1 million, indicating 10.9% growth from the prior-year period.

What Our Model Suggests

Our proven Zacks model clearly shows that a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has good chances of beating estimates if it also has a positive Earnings ESP . You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

Illumina has a Zacks Rank #2, which increases the predictive power of ESP, and an Earnings ESP of +0.32%. This combination implies that the company is likely to beat on earnings this reporting cycle. The Zacks Consensus Estimate for the bottom line of 81 cents translates into 9.5% growth year over year.

Other Stocks Worth a Look

Here are a few other medical stocks worth considering from the same space as these too comprise the right combination of elements to surpass expectations this time around.

Chimerix, Inc. CMRX has an Earnings ESP of +13.89% and a Zacks Rank of 2. You can see the complete list of today's Zacks #1 Rank stocks here .

MacroGenics, Inc. MGNX has an Earnings ESP of +24.79% and is a Zacks #2 Ranked stock.

NanoString Technologies, Inc. NSTG has an Earnings ESP of +4.64% and a Zacks Rank of 1.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.





This article appears in: Investing , Business , Earnings , Stocks
Referenced Symbols: CMRX , NSTG , MGNX , ILMN




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