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Can Illumina (ILMN) Continue its Earnings Streak in Q2? - Analyst Blog

Illumina Inc . ILMN is scheduled to report its second-quarter 2015 results on Jul 21. Last quarter, the company had posted a positive earnings surprise of 26.4%.

Moreover, Illumina's earnings have outpaced the Zacks Consensus Estimate in all of the past four quarters, with an average beat of 21.8%. Let's see how things are shaping up prior to this announcement.

Why a Likely Positive Surprise?

Our proven model shows that Illumina is likely to beat earnings because it has the right combination of two key ingredients.

Zacks ESP: Illumina has an Earnings ESP of +3.85%. That is because the Most Accurate estimate stands at 81 cents while the Zacks Consensus Estimate is pegged lower at 78 cents. This is a meaningful and leading indicator of a likely positive earnings surprise.

Zacks Rank: Illumina has a Zacks Rank #2 (Buy). Note that stocks with a Zacks Rank #1 (Strong Buy), 2 or 3 (Hold) have a significantly higher chance of beating earnings estimates. Conversely, Sell-rated stocks (Zacks Rank #4 or 5) should never be considered going into an earnings announcement.

The combination of Illumina's Zacks Rank #2 and +3.85% ESP makes us confident of a positive earnings beat at the company.

What is Driving the Better than Expected Earnings?

Illumina, as one of the leading companies in the multi-billion dollar next-generation sequencing (NGS) market, started off 2015 on a positive note delivering remarkable results in the first quarter. Currently, management is focusing on product innovation and market development with an aim to address the large and untapped opportunities of the powerful genomics market. This, in turn, is expected to boost the company's growth trajectory in the remaining quarters of 2015 as well.

Illumina's expansion strategy by developing meaningful strategic partnerships with therapeutics and diagnostic services providers has been a real eye-catcher for quite some time in the past. This has helped enhance the company's portfolio of sequencing products.

Worth mentioning in this context is the latest commercialization agreement that Illumina signed with Neogen on Jul 7, 2015, under which laboratories will be able to purchase the GeneSeek Genomic Profiler (GGP) SNP arrays from Illumina. This will mean higher revenues for the company's array business.

Earlier in June 2015, Illumina tied up with China-based genomic enterprise, Annoroad, to co-develop a NGS diagnostic system that will improve patients' reproductive health. The move was indicative of the company's attempt to expand its footprint in the rapidly emerging market of China.

Moreover, owing to its collaboration with Berry Genomics, Illumina has already successfully generated huge business in China. Management expects to significantly expand its market share in China, in terms of placements, through the remaining quarters of 2015. We believe these efforts will be duly reflected in the company's sales growth in China in the yet-to-be-reported quarters of 2015.

On the flip side, Illumina expects continued weakness in its Japanese business in the near term as budget delays are anticipated to linger through fourth-quarter 2015.

Moreover, despite government budget cuts, NIH funding issues and foreign exchange headwinds, strong worldwide demand and solid contributions from the sequencing business are expected to overcome the headwinds for Illumina.

Other Stocks to Consider

Here are some other companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:

ZELTIQ Aesthetics, Inc. ZLTQ , earnings ESP of +22.22% and a Zacks Rank #2.

Align Technology Inc. ALGN , earnings ESP of +2.63% and a Zacks Rank #2.

DENTSPLY International Inc. XRAY , earnings ESP of +1.47% and a Zacks Rank #2.

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ALIGN TECH INC (ALGN): Free Stock Analysis Report

ILLUMINA INC (ILMN): Free Stock Analysis Report

DENTSPLY INTL (XRAY): Free Stock Analysis Report

ZELTIQ AESTHETC (ZLTQ): Free Stock Analysis Report

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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.


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

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