Illumina, Inc.ILMN adjusted earnings per share (“EPS”) of $ 1.22 for the fourth quarter of 2020 exceeded Zacks’ consensus estimate by 0.8%. However, the net result decreased by 28.2% compared to the same quarter last year.
The adjustments include separate tax costs and income tax benefits.
Including one-time items, the company’s GAAP earnings per share were $ 1.75, up 8.7% year-over-year.
Full year adjusted earnings per share were $ 4.50, reflecting a 31.5% decrease from the same period last year. However, the statistic marginally surpassed the Zacks Consensus Estimate by 0.2%.
Full year GAAP earnings per share were $ 4.45, reflecting a decrease of 33.9% from the same period last year.
Income
For the past quarter, Illumina sales were $ 953 million, stable year over year. However, the top line exceeded Zacks’ consensus estimate by 0.4%.
While fourth quarter revenues were unchanged year over year, they were 20% higher than the consecutive last reported quarter.
Full year sales were $ 3.24 billion, reflecting a decrease of 8.6% from the same period last year. However, the statistic was in line with Zacks’ consensus estimate.
Segment details
Sequencing Consumables revenue for the reported quarter was $ 599 million, up 4.7% year over year. Sequencing Instrument revenues were $ 141 million, unchanged from a year ago. Sequencing revenue, a sub-segment of the Service & Other segment, was $ 106 million, down 14.5% from the same quarter last year.
In the fourth quarter, Illumina witnessed the second highest NovaSeq orders, mainly driven by the launch of NovaSeq 6000 v1.5 reagents in August 2020. The latest product led to increased new customer growth and additional HiSeq conversions . The launches of NextSeq 1000 and 2000 also boosted sales in the fourth quarter.
Illumina, Inc. Price, consensus and EPS surprise
Illumina, Inc. price-consensus-eps-surprise chart | Illumina, Inc. quote
Margins
Adjusted gross margin (excluding amortization of intangible assets acquired) was 66.8% in the reported quarter, indicating a contraction of 325 basis points (bps) year over year.
Research and development expenses increased 24.2% year over year to $ 200 million, while selling, general and administrative expenses increased 27.9% to $ 298 million. As a result, operating expenses increased 26.4% to $ 498 million.
Adjusted operating income for the quarter was $ 139 million, down 49.3% from income a year ago. The adjusted operating margin was 14.6%, reflecting a massive contraction of 1,417 basis points year-on-year.
Financial update
Illumina left 2020 with cash and cash equivalents plus short-term investments of $ 3.47 billion compared to $ 3.41 billion at the end of 2019. Total debt (including current portion) at the end of 2020 was $ 1.18 billion, compared to $ 1 , 14 billion at the end of 2019.
The company repurchased $ 280 million of common stock in the quarter, and $ 15 million is still available for share repurchases under the company’s current plan.
Cumulative net cash from operating activities at the end of 2020 was $ 1.08 billion, compared to $ 1.05 billion a year ago.
The cumulative capital expenditures the company made in late 2020 was $ 189 million, compared to $ 209 million a year ago. Accordingly, the cumulative free cash flow the company reported at the end of 2020 was $ 891 million, an increase from a year ago’s free cash flow of $ 842 million.
Guidelines for 2021
Illumina expects revenue growth to be between $ 3.79 billion and $ 3.89 billion for 2021, indicating a 17-20% increase from the same period a year ago. Zacks’ consensus estimate for the same is currently pegged at $ 3.84 billion.
GAAP Earnings Per Share for 2021 is likely to be between $ 4.76 and $ 5.01.
The adjusted EPS for 2021 is estimated to be between $ 5.10 and $ 5.35. Zacks’ consensus estimate for the same is currently pegged at $ 5.61.
Our Take
Illumina left the fourth quarter with better-than-expected results. However, lower sequence revenues due to pandemic business interruptions dragged on to overall sales. The decline in overall microarray revenues due to COVID-19-related headwinds is also of particular concern. Contraction in both margins does not bode well for the stock either.
On the positive side, gradually improving business conditions are fueling optimism about equities. The successive improvement in segment revenues in most regions also looks impressive. In addition, the robust acceptance of NovaSeq 6000 v1.5 reagents to enhance deeper genomic discoveries looks impressive. The announcement of TSO 500 partnerships with Bristol Myers Squibb, Kura Oncology, Myriad Genetics and Merck to advance comprehensive genomic profiling, as well as Harvard Pilgrim Health Care to increase access to whole genome sequencing for genetic disease testing, bodes well for the file.
Zacks Rank & Stocks to Consider
Illumina currently has a Zacks Rank # 5 (Strong Sell).
Some other better-placed stocks in the broader medical space are Abbott Laboratories ABBOT, Hologic, Inc. HOLX and IDEXX Laboratories, Inc. IDXX.
Abbott reported adjusted earnings per share of $ 1.45 for the fourth quarter of 2020, which exceeded Zacks’ consensus estimate by 6.6%. Fourth quarter global sales of $ 10.7 billion were 7.9% higher than consensus. The company currently holds a Zacks Rank # 2 (buy). You can see the full list of current Zacks # 1 Rank (Strong Buy) stocks here.
Hologic reported adjusted earnings per share of $ 2.86 for the first quarter of fiscal 2021, beating the Zacks Consensus Estimate by 33.6%. The company currently boasts a Zacks Rank # 1.
IDEXX reported adjusted earnings per share of $ 2.01 for the fourth quarter of 2020, which exceeded Zacks’ consensus estimate by 40.6%. Revenue of $ 720.9 million was 5.8% higher than consensus. The company currently holds a Zacks Rank # 2.
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