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Illumina (ILMN) Q4 Earnings: A Beat in Store for the Stock?
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We expect Illumina Inc (ILMN - Free Report) to beat expectations when it reports fourth-quarter 2016 results after the closing bell on Jan 31. Last quarter, the company reported a positive earnings surprise of 11.49% with the four-quarter trailing average beat being 6.01%. 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 components.
Zacks ESP: Illumina has an Earnings ESP of +1.24%. That is because the Most Accurate estimate is 82 cents while the Zacks Consensus Estimate is pegged lower at 81 cents. A favorable Zacks ESP serves as a meaningful and leading indicator of a likely positive earnings surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Illumina currently 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 (#4 or 5) should never be considered going into an earnings announcement.
The combination of Illumina’s Zacks Rank #3 and +1.24% ESP makes us reasonably confident of a positive earnings beat.
What is Driving the Better-Than-Expected Earnings?
In the third quarter, Illumina’s revenues grew 10.3% year over year. Per management, growth in sequencing consumables and strong demand from microarrays primarily supported the top line. Revenues from consumables were up 23% on the back of solid growth in sequencing consumable revenues. Even in the fourth quarter, management has been emphasizing on its portfolio of sequencing platforms to fortify its market position. We expect this factor to boost the company’s performance in the fourth quarter itself.
Several recent product launches include NovaSeqSeries, a scalable sequencing solution for study of rare genetic variants and TruSight Tumor 170 to support the transformation of the tumor-profiling paradigm. Recently, Illumina teamed up with Bio-Rad Laboratories to launch the Illumina Bio-Rad Single-Cell Sequencing Solution. Other tie-ups in this space include the deal with Mayo Clinic to advance the NGS technology. We believe that these developments will raise investors’ confidence in the company.
We are also looking forward to GRAIL, Illumina’s recently developed venture for the cancer screening market. The company has started detailed planning necessary to embark on a large-scale clinical trial in 2017 with the goal of demonstrating a stage shift in diagnosis. We believe GRAIL will significantly expand Illumina’s share in the multi-billion dollar oncology market.
Based on these positive factors, in the last three months, Illumina outpaced the Zacks categorized Medical - Biomedical and Genetics industry in terms of share price performance. The stock till now has generated a return of 9.4%, way higher than the 2.5% of the broader industry. The company’s long-term fundamentals are also compelling with a strong 5-year CAGR of 20.4% for revenues and 26.4% for earnings per share.
On the flip side, the year-over-year fall in sequencing instrument revenues due to the challenging HiSeq X comparison is of grave concern. Headwinds such as NIH funding reduction and stiff competition continue to hurt the stock.
Other Stocks to Consider
Here are some other companies that you may consider as our model shows that they have the right combination of elements to post an earnings beat in the upcoming quarter:
Molina Healthcare Inc. (MOH - Free Report) has an Earnings ESP of +5.33% and a Zacks Rank #2.
Universal Health Services, Inc. (UHS - Free Report) has an Earnings ESP of +4.97% and a Zacks Rank #2.
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Illumina (ILMN) Q4 Earnings: A Beat in Store for the Stock?
We expect Illumina Inc (ILMN - Free Report) to beat expectations when it reports fourth-quarter 2016 results after the closing bell on Jan 31. Last quarter, the company reported a positive earnings surprise of 11.49% with the four-quarter trailing average beat being 6.01%. 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 components.
Zacks ESP: Illumina has an Earnings ESP of +1.24%. That is because the Most Accurate estimate is 82 cents while the Zacks Consensus Estimate is pegged lower at 81 cents. A favorable Zacks ESP serves as a meaningful and leading indicator of a likely positive earnings surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Illumina currently 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 (#4 or 5) should never be considered going into an earnings announcement.
The combination of Illumina’s Zacks Rank #3 and +1.24% ESP makes us reasonably confident of a positive earnings beat.
Illumina, Inc. Price and EPS Surprise
Illumina, Inc. Price and EPS Surprise | Illumina, Inc. Quote
What is Driving the Better-Than-Expected Earnings?
In the third quarter, Illumina’s revenues grew 10.3% year over year. Per management, growth in sequencing consumables and strong demand from microarrays primarily supported the top line. Revenues from consumables were up 23% on the back of solid growth in sequencing consumable revenues. Even in the fourth quarter, management has been emphasizing on its portfolio of sequencing platforms to fortify its market position. We expect this factor to boost the company’s performance in the fourth quarter itself.
Several recent product launches include NovaSeqSeries, a scalable sequencing solution for study of rare genetic variants and TruSight Tumor 170 to support the transformation of the tumor-profiling paradigm. Recently, Illumina teamed up with Bio-Rad Laboratories to launch the Illumina Bio-Rad Single-Cell Sequencing Solution. Other tie-ups in this space include the deal with Mayo Clinic to advance the NGS technology. We believe that these developments will raise investors’ confidence in the company.
We are also looking forward to GRAIL, Illumina’s recently developed venture for the cancer screening market. The company has started detailed planning necessary to embark on a large-scale clinical trial in 2017 with the goal of demonstrating a stage shift in diagnosis. We believe GRAIL will significantly expand Illumina’s share in the multi-billion dollar oncology market.
Based on these positive factors, in the last three months, Illumina outpaced the Zacks categorized Medical - Biomedical and Genetics industry in terms of share price performance. The stock till now has generated a return of 9.4%, way higher than the 2.5% of the broader industry. The company’s long-term fundamentals are also compelling with a strong 5-year CAGR of 20.4% for revenues and 26.4% for earnings per share.
On the flip side, the year-over-year fall in sequencing instrument revenues due to the challenging HiSeq X comparison is of grave concern. Headwinds such as NIH funding reduction and stiff competition continue to hurt the stock.
Other Stocks to Consider
Here are some other companies that you may consider as our model shows that they have the right combination of elements to post an earnings beat in the upcoming quarter:
Cempra Inc. has a positive Earnings ESP of 15.79% and a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
Molina Healthcare Inc. (MOH - Free Report) has an Earnings ESP of +5.33% and a Zacks Rank #2.
Universal Health Services, Inc. (UHS - Free Report) has an Earnings ESP of +4.97% and a Zacks Rank #2.
Zacks' Top Investment Ideas for Long-Term Profit
How would you like to see specific recommendations to help you pick today’s most promising long-term stocks? Starting now, you can look inside our portfolios featuring stocks under $10, income stocks, value investments and more. These picks, which have double and triple-digit profit potential, are rarely available to the public. But you can see them now. Click here >>