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Can Illumina (ILMN) Spring a Surprise this Earnings Season?

Illumina, Inc. ILMN, a leading provider of tools and integrated systems for analysis of genetic variation and function, is scheduled to report second-quarter 2017 results on Aug 1, after the closing bell.

Last quarter, the company’s earnings were in line with the Zacks Consensus Estimate. However, Illumina’s earnings outpaced the Zacks Consensus Estimate in three of the past four quarters, at an average of 8.56%.

Let’s take a look at how things are shaping up prior to this announcement.

Factors at Play

In the last reported first quarter of 2017, Illumina witnessed robust revenue growth on account of consistent improvement in sequencing consumables and strong demand of microarrays. While management is still emphasizing on its portfolio of sequencing platforms to fortify its market position, we expect the company to maintain top-line growth in the second quarter of 2017.

Per management, top-line growth in the first quarter can also be attributed to strong uptake of the NovaSeq platform with more than 135 orders placed in this period.Moreover, with an active HiSeq customer base of roughly 800 customers, the company expects the replacement of older generation instruments by NovaSeq trend to continue in the yet-to-be reported quarter.

Illumina, Inc. Price and EPS Surprise


Further, the company recently launched VeriSeq NIPT Solution in Europe, a CE-IVD marked next-generation sequencing based approach to noninvasive prenatal testing. Notably, outside the U.S., the rate of NIPT adoption is increasing. The Netherlands and Denmark began covering the test in the first quarter and the same is expected shortly in France. The company continues to see positive reimbursement trends in Europe as well. Also, Illumina has been forging ahead with its NIPT expansion plans in China.

We believe these developments will boost the company’s top line in the upcoming quarter.

On the flip side, weak margins owing to the introduction of NovaSeq, higher array services revenues and product mix within sequencing consumables will continue to act as deterrents for the company. Also, a tough competitive landscape may pose a challenge for the company. We are also apprehensive about issues pertaining to NIH funding which Illumina has been facing for quite some time now.

Overall, for the second quarter of 2017, Illumina projects revenue growth of approximately 7%. The current Zacks Consensus Estimate for second-quarter revenues is pegged at $642.5 million. The company expects adjusted EPS in the range of 65–70 cents. However, the Zacks Consensus Estimate is stable at 68 cents, within the guided range.

Earnings Whispers

Our proven model does not conclusively show that Illumina is likely to beat estimates this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. However, that is not the case here, as you will see below.

Zacks ESP:  Illumina has an Earnings ESP of 0.00%. That is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 68 cents. You can uncover the best stocks to buy or sell before they’re reported with our">Earnings ESP Filter.

Zacks Rank: Illumina’s Zacks Rank #3 increases the predictive power of ESP. However, the company’s 0.00% Earnings ESP makes surprise prediction difficult.

Meanwhile, we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

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

Becton, Dickinson and Company BDX has an Earnings ESP of +0.41% and a Zacks Rank #2.

Thermo Fisher Scientific Inc.TMO has an Earnings ESP of +0.44% and a Zacks Rank #2. You can see">the complete list of today’s Zacks #1 Rank stocks here.

Stryker Corporation SYK has an Earnings ESP of +0.66% and a Zacks Rank #2.

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