Illumina, Inc.ILMN’s adjusted earnings per share (“EPS”) in the fourth quarter of 2020 of $ 1.22 exceeded Zacks’ consensus estimate by 0.8%. However, the final result fell 28.2% in relation to the previous year’s quarter.
The adjustments include tax expenses and discrete tax benefits.
Including single items, the company’s EPS GAAP was $ 1.75, an increase of 8.7% year on year.
The adjusted EPS for the whole year was $ 4.50, reflecting a reduction of 31.5% over the previous year. However, the metric surpassed the Zacks consensus estimate marginally by 0.2%.
EPS GAAP for the full year was $ 4.45, reflecting a 33.9% drop from the prior year period.
Revenues
In the quarter under review, Illumina’s revenue was $ 953 million, stable year after year. However, the top line exceeded the Zacks consensus estimate by 0.4%.
Although fourth quarter revenues remained unchanged year after year, it was 20% higher than the last quarter reported sequentially.
Full-year revenue was $ 3.24 billion, reflecting an 8.6% drop compared to the prior year period. However, the metric was in line with Zacks’ consensus estimate.
Segment details
Consumable sequencing revenues totaled $ 599 million in the reported quarter, an increase of 4.7% year on year. Income from sequencing instruments was $ 141 million, unchanged from the previous year. Sequencing revenues, a sub-segment of the Services and Others segment, were $ 106 million, down 14.5% from the previous year quarter.
In the fourth quarter, Illumina witnessed NovaSeq’s second largest orders, mainly due to the August 2020 launch of NovaSeq 6000 v1.5 reagents. The latest product led to further growth in new customers, as well as additional HiSeq conversions. In addition, NextSeq 1000 and 2000 launches boosted fourth quarter revenue.
Illumina, Inc. price, EPS consensus and surprise
Illumina, Inc. price-consensus-eps-surprise-chart | Illumina, Inc. stock quote
Margins
The adjusted gross margin (excluding amortization of acquired intangible assets) was 66.8% in the reported quarter, highlighting a contraction of 325 basis points (bps) year on year.
Research and development expenses increased 24.2% year-over-year to US $ 200 million, while sales, general and administrative expenses increased 27.9% to US $ 298 million. This raised operating costs by 26.4% to $ 498 million.
Adjusted operating revenue for the quarter was $ 139 million, 49.3% below the previous year’s revenue. The adjusted operating margin reached 14.6%, reflecting a large contraction of 1417 bps 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. The total debt (including the current installment) 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 shares in the quarter and $ 15 million is still available for repurchase of shares according to the company’s current plan.
The accumulated net cash generated by operating activities at the end of 2020 was $ 1.08 billion, compared to $ 1.05 billion the previous year.
Accumulated capital expenditures incurred by the company at the end of 2020 were $ 189 million, compared to $ 209 million the previous year. Consequently, the accumulated free cash flow reported by the company at the end of 2020 was $ 891 million, up from the previous year’s free cash flow of $ 842 million.
Orientation 2021
Illumina projects revenue growth for 2021 in the range of $ 3.79 billion to $ 3.89 billion, indicating an increase of 17-20% compared to the prior year period. Zacks’ consensus estimate for the same is currently at $ 3.84 billion.
EPS GAAP for 2021 is likely to be in the $ 4.76 to $ 5.01 range.
The EPS adjusted for 2021 is projected in the range of $ 5.10 to $ 5.35. Zacks’ consensus estimate for the same is currently at $ 5.61.
Our opinion
Illumina left the fourth quarter with better than expected results. However, its lower sequencing revenues due to business interruptions caused by a pandemic dragged overall revenue down. The decline in total microarray revenue due to headwinds related to COVID-19 is also of particular concern. The contraction on both margins does not bode well for the stock either.
On the positive side, the gradual improvement in business conditions fuels optimism about stocks. The sequential improvement in segment revenues in most geographies also looks impressive. In addition, the robust adoption 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 the comprehensive genomic profile, as well as with Harvard Pilgrim Health Care to expand access to complete genome sequencing for genetic disease testing, it bodes well for the stock.
Zacks Rank & Stocks to consider
Illumina currently carries a Zacks Rank # 5 (Strong Sell).
Some other actions with better classification in the broader medical space are Abbott Laboratories ABT, Hologic, Inc. HOLX and IDEXX Laboratories, Inc. IDXX.
Abbott reported adjusted EPS for the fourth quarter of 2020 of $ 1.45, which exceeded Zacks’ consensus estimate by 6.6%. Worldwide fourth quarter sales of $ 10.7 billion exceeded the consensus mark by 7.9%. The company currently carries a Zacks Rank # 2 (Buy). You can see the complete list of current Zacks # 1 Rank (Strong Buy) stocks here.
Hologic reported first-quarter fiscal 2021 adjusted earnings per share of $ 2.86, exceeding Zacks’ consensus estimate by 33.6%. The company currently boasts a Zacks Rank # 1.
IDEXX reported adjusted EPS for the fourth quarter of 2020 of $ 2.01, which exceeded the Zacks consensus estimate by 40.6%. Revenue of $ 720.9 million surpassed the consensus mark by 5.8%. The company currently carries a Zacks Rank # 2.
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