Will Solid Consumables Drive Illumina's (ILMN) Q1 Earnings?

Illumina, Inc. ILMN is slated to release first-quarter 2019 results on Apr 25, after market close. In the last reported quarter, the company reported negative earnings surprise of 2.94%. Nevertheless, the company generated better-than-expected earnings in three of the trailing four quarters, the average being 22.07%.

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 on strong demand from sequencing and array systems, consumables as well as services. The trend is expected to continue in the yet-to-be-reported quarter.

In the last reported quarter, Illumina registered double-digit consumables growth in its sequencing portfolio with an uptrend in all throughput categories.

Illumina, Inc. Price and EPS Surprise

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


Despite the ongoing customers’ transition from HiSeq consumables to NovaSeq, the company’s first-quarter 2019 results are expected to gain from the high throughput suite. From the mid throughput sequencing consumables, the company registered strong shipment revenues from NextSeq. With more customers adopting the system primarily for Non-Invasive Prenatal Test and oncology applications, it is expected to fare well in the first quarter as well.

In the last reported quarter, the low throughput suite showcased impressive year-over-year growth on MiSeq and MiniSeq within the respective ranges as well as modest contribution from IC consumables. The company catalyzed new upgrades within its low throughput HiSeq consumer base. Illumina launched S prime, the latest NovaSeq flow cell in February. We expect this development to contribute to the top line in the yet-to-be-reported quarter.

The portfolio of Sequencing Systems projected robust performance in the last reported quarter on more than 100 NovaSeq shipments.

Illumina has been investing in several research initiatives to strengthen the NGS portfolio. In the fourth quarter of 2018, NextSeqDx was approved by the PMDA in Japan. This enable the company to establish its first IVD registered instrument in the country. It also announced the partnership with Sysmex Corporation to commercialize the first Next-Generation Sequencing-based oncology IVD panel in Japan.

The Zacks Consensus Estimate for Product revenues is pegged at $693 million, depicting an increase of 10.3% from the year-ago quarter.

The portfolio of Sequencing Services registered revenue growth, driven by the GeL technology. Population genomics are expected to contribute to the top line in the to-be-reported quarter. The company has been undertaking around 50 global initiatives and expects several of these to yield results in 2019.

The Zacks Consensus Estimate for Service and other revenues is pegged at $141 million, representing a decline of 8.4% from the year-earlier quarter.

All these developments are likely to be reflected in Illumina’s first-quarter 2019 performance. Overall, first-quarter total revenues are projected to be $833 million, indicating 6.5% growth from the prior-year period.

What Our Model Suggests

Our proven Zacks model 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. You can see the complete list of today’s Zacks #1 Rank stocks here.

Illumina has a Zacks Rank #2, which increases the predictive power of ESP. However, an Earnings ESP of -2.99% makes surprise prediction difficult. The Zacks Consensus Estimate for earnings is pegged at $1.34, which reflects a decline of 7.6% year over year.

Key Picks

Here are some medical stocks worth considering from the same space as they have the right combination of elements to beat estimates.

Cerner Corporation CERN has an Earnings ESP of +1.05% and a Zacks Rank #2.

Thermo Fisher Scientific Inc. TMO has an Earnings ESP of +0.26% and a Zacks Rank #2.

Stryker Corporation SYK has an Earnings ESP of +0.35% and a Zacks Rank #3.

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Cerner Corporation (CERN): Free Stock Analysis Report

Thermo Fisher Scientific Inc. (TMO): Free Stock Analysis Report

Stryker Corporation (SYK): Free Stock Analysis Report

Illumina, Inc. (ILMN): 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.

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