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Pacific Biosciences (PACB) Down 15.6% Since Earnings Report: Can It Rebound?

A month has gone by since the last earnings report for Pacific Biosciences of California, Inc.PACB . Shares have lost about 15.6% in that time frame, underperforming the market.

Will the recent negative trend continue leading up to its next earnings release, or is PACB 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 drivers.

Recent Earnings

Pacific Biosciences reported a loss of 18 cents per share in the fourth quarter of 2017, a penny narrower than the Zacks Consensus Estimate. Also, the figure was 14.2% narrower than the year-ago quarter's loss of 21 cents.

In 2017, reported loss per share was 87 cents, 4.8% wider than the year-ago tally of 83 cents.

Fourth-quarter revenues of $24.9 million exceeded the Zacks Consensus Estimate of $22 million but dipped 3.1% on a year-over-year basis. Notably, the DNA sequencing market is highly competitive due to presence of several established players. Cutthroat competition in the niche space is the primary reason for the year-over-year top-line decline.

Segment Details

Product revenues rose 5.9% to almost $21.8 million. Service and Other revenues deteriorated 18.3% from the year-earlier quarter to almost $3.1 million. Total $24.9 million of product, service and other revenues were 2% higher than the prior-year number.

Consumable revenues in the quarter under review were $12.7 million, up 70% on a year-over-year basis. This marked the metric's eighth consecutive quarter of growth on continued consumable sales momentum. The upside was driven by an increased utilization of the company's growing installed base of sequel systems.

Instrument revenues in the fourth quarter were $9.2 million, down from $13.1 million on a year-over-year basis as higher shipments of instruments took place in the latter part of 2016 and early 2017.

The company has no record of contractual revenues in the quarter.

Margin & Balance Sheet Details

In the fourth quarter, Pacific Biosciences generated gross profit of $9.5 million. As a percentage of revenues, gross margin in the quarter was 38.1%, down 610 basis points (bps) year over year.

Operating expenses in the fourth quarter of 2017 totaled $30 million compared with $29.2 million on a year-over-year basis. R&D expenses in the quarter totaled $15.6 million, down from $16.3 million a year ago. Selling, general and administrative expenses in the period were $14.4 million compared with $12.9 million in the fourth quarter of 2016. The company incurred $20.5 million of operating loss in the quarter, wider than the loss of $17.8 million a year ago.

Cash and investments at the end of 2017 was $62.9 million compared with $71.9 million at 2016 end.

Guidance

Banking on a better-than-expected fourth-quarter show, Pacific Biosciences expects 2018 revenues to grow 20% from the year-ago figure, translating to approximately $112 million in total revenues. For the near term, the company anticipates first-quarter 2018 revenues to be slightly lower than the reported count in fourth-quarter 2017 due to seasonality.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. There has been one revision lower for the current quarter.

Pacific Biosciences of California, Inc. Price and Consensus

Pacific Biosciences of California, Inc. Price and Consensus | Pacific Biosciences of California, Inc. Quote

VGM Scores

At this time, PACB has a subpar Growth Score of D, while it is doing better on the momentum front with B. However, the stock was allocated a grade of F on the value side, putting it in the fifth quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Zacks' style scores indicate that the company's stock is suitable solely for momentum investors.

Outlook

Estimates have been broadly trending downward for the stock and the magnitude of this revision indicates a downward shift. Notably, PACB has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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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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