Illumina Gets a Reset

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Illumina Inc. (NASDAQ: ILMN) reported its second-quarter financial results on Wednesday before the markets opened. The company had $0.80 in earnings per share (EPS) on $539 million in revenue, compared to Zacks consensus estimates of $0.78 in EPS on $543 million in revenue. In the same period of the previous year, it posted EPS of $0.57 and $448 million in revenue.

The company gave guidance for the 2015 full year. It expects revenue to increase 20% year over year while EPS is expected to be in the range of $3.39 to $3.45. The consensus estimates are $3.44 in EPS and revenue of $2.26 billion for the full year.

Gross margin totaled 72.4% for the quarter, an increase of 150 basis points from the same period of the previous year.

In terms of its segments Illumina posted:

  • Instruments grew a total of 11%.
  • Consumables grew 23% and accounted for 56% of total revenue.
  • Service and Other grew 21%.

At the end of the quarter, cash and investments totaled $1.51 billion, compared to $1.37 billion at the end of the first quarter. At the same time, free cash flow totaled $130 million, compared to $30 million.

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According to Janney Capital Markets:

Illumina missed revenue expectations and non-GAAP slightly beat estimates. With revenue growth decelerating, we see limited expansion to the 50.4x FY17 PE multiple on ILMN. We lower our rating from Buy to Neutral and our Fair value remains $240 per share. … We expected better performance from the array segment (12% of revenue), but a decline of 15-20% pulled down total revenue growth. Arrays provide an economical solution to SNP detection versus sequencing and competition is more intense than whole genome sequencing. Total sequencer growth was a robust 28% and the remainder of 2015 implies 23-27% growth.

Shares of Illumina were down 8.4% to $217.62 Wednesday afternoon. The stock has a consensus analyst price target of $238.40 and a 52-week trading range of $145.12 to $232.00.