Can Illumina (ILMN) Keep the Earnings Streak Alive in Q4? - Analyst Blog

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Leading life science tools manufacturer, Illumina Inc. ( ILMN ), is set to report its fourth-quarter and full-year 2014 earnings numbers on Jan 27.

Last quarter, the company had posted an impressive positive surprise of 37.50%. In fact, in all the past four quarters, Illumina's earnings have outpaced the Zacks Consensus Estimate with an average beat of 18%. Let's see how things are shaping up for this announcement.

Factors at Play

As one of the leading companies in the next generation sequencing (NGS) market, Illumina aims at bolstering its position in this multi-billion dollar space with some highly competitive products in its existing portfolio and pipeline.

With this strategy in mind, Illumina launched new reagent kits for its HiSeq X Ten and HiSeq 2500 Sequencing Systems during the fourth quarter. These kits will offer researchers using Illumina sequencing technologies, superior data quality. This, in turn, should boost consumables revenues at the company from the HiSeq sequencing systems, for the coming quarter.

Per management belief, shipment rate of Illumina's HiSeq X instruments largely depends on its customers' readiness to absorb and utilize those systems. Although during the third quarter, Illumina had experienced an increase in the units shipped, for the to-be-reported fourth quarter, management expects to observe fewer shipments of HiSeq Xs based on Illumina's current estimation of customer readiness.

Although, government budget cuts, including NIH funding issues were the major downsides, strong worldwide demand and solid contributions from the sequencing business are expected to overcome the headwinds for Illumina.

According to its recently released preliminary results, Illumina estimates total revenue of $512 million for the yet to-be-reported fourth quarter, which reflects a massive improvement of 32.2% over the prior-year quarter's revenue of $387.3 million. The estimated top line compares favorably with the Zacks Consensus Estimate of $504 million by 1.6%.

Illumina now expects adjusted earnings per share (EPS) for full year 2014 slightly above the top end of its previously announced guidance range of $2.63-$2.65. The current Zacks Consensus Estimate of $2.64 for the full year lies below the company's current EPS forecast.

Earnings Whispers?

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 a positive Earnings ESP of +1.28%.That is because the Most Accurate estimate stands at 79 cents while the Zacks Consensus Estimate is pegged lower at 78 cents. This is very meaningful and a leading indicator of a likely positive earnings surprise.

Zacks Rank: Illumina has a Zacks Rank #3 (Hold). Note that stocks with a Zacks Rank #1, 2 or 3 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 #3 and +1.28% ESP makes us confident of a positive earnings beat at the company.

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:

Hologic Inc. ( HOLX ), earnings ESP of +2.78% and a Zacks Rank #1 (Strong Buy).

ZELTIQ Aesthetics, Inc. ( ZLTQ ), earnings ESP of +166.67% and a Zacks Rank #2 (Buy).

CR Bard Inc. ( BCR ), earnings ESP of +0.89% and a Zacks Rank #3.

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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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