Illumina, Inc.The adjusted earnings per share (“EPS”) of ILMN in the fourth quarter of 2020 of $ 1.22 exceeded the Zacks consensus estimate by 0.8%. However, the result fell by 28.2% from the previous quarter.
The adjustments include discrete tax expenses and income tax benefits.
Including items included, the company’s GAAP earnings were $ 1.75, compared to 8.7% year-on-year.
The year-on-year adjusted EPS was $ 4.50, reflecting a decrease of 31.5% compared to the previous year. However, the benchmark marginally exceeded the Zacks Consensus Estimate by 0.2%.
The annual GAAP profit was $ 4.45, reflecting a 33.9% drop from the previous year.
Income
In the quarter under discussion, Illumina’s revenue was $ 953 million, year-on-year. However, the top line exceeded the Zacks consensus estimate by 0.4%.
Although fourth-quarter revenue remained unchanged year-on-year, it was 20% higher than the quarter last reported in the report.
The annual revenue was $ 3.24 billion, reflecting a decrease of 8.6% compared to the previous year. However, the measure was in line with the Zacks Consensus Estimate.
Segment Details
Consumption revenue was $ 599 million for the reported quarter, up 4.7% year-over-year. Revenue from the order of instruments was $ 141 million, unchanged from the year-ago figure. Revenue, a sub-segment of the Service & Other segment, was $ 106 million, down 14.5% from the previous quarter.
In the fourth quarter, Illumina witnessed the second highest NovaSeq orders, driven primarily by the launch of NovaSeq 6000 v1.5 reagents in August 2020. The latest product led to higher growth of new customers as well as additional HiSeq conversions. The launch of NextSeq 1000 and 2000 also improved the fourth quarter topline.
Illumina, Inc. Price, consensus and EPS surprise
Illumina, Inc. price-consensus-eps-surprise-chart | Illumina, Inc. Quote
Margins
The adjusted gross margin (excluding amortization of acquired intangible assets) was 66.8% in the reported quarter, highlighting a year-on-year contraction of 325 basis points (GDP).
Research and development costs increased by 24.2% year-on-year to $ 200 million, while sales, general and administrative expenses increased by 27.9% to $ 298 million. This increased operating expenses by 26.4% to $ 498 million.
Adjusted operating income for the quarter was $ 139 million, a decrease of 49.3% compared to the previous year. The adjusted operating margin increased to 14.6%, reflecting a tremendous 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. Total debt (including the current portion) was $ 1.18 billion at the end of 2020 compared to $ 1, 14 billion at the end of 2019.
The company repurchased $ 280 million worth of ordinary shares during the quarter and $ 15 million is still available for share repurchase according to the company’s current plan.
The cumulative net cash provided by operating activities at the end of 2020 was $ 1.08 billion compared to $ 1.05 billion a year ago.
The cumulative capital expenditure that the company incurred at the end of 2020 was $ 189 million compared to $ 209 million a year ago. As a result, the cumulative free cash flow that the company reported at the end of 2020 was $ 891 million, compared to the previous year’s free cash flow of $ 842 million.
2021 Lead
Illumina predicts that its revenue growth for 2021 will be between $ 3.79 billion and $ 3.89 billion, indicating a 17-20% increase over the previous year. The Zacks consensus estimate for this is currently set at $ 3.84 billion.
GAAP EPS for 2021 is likely to be between $ 4.76 and $ 5.01.
Adapted EPS for 2021 is projected between $ 5.10 and $ 5.35. The Zacks consensus estimate for the same is currently set at $ 5.61.
We take
Illumina left the fourth quarter with better-than-expected results. However, the lower sequence of events due to disruptions led to pandemics, dragged the overall top line. The decrease in total revenue from micro-settlement due to COVID-19 related headwinds is also of particular concern. The merger in both margins does not bode well for the stock.
It is positive that the gradually improving business conditions have optimism on the stock. Consecutive improvement in segmental revenue in most geographic areas also looks impressive. In addition, the robust use of NovaSeq 6000 v1.5 reagents to enhance deeper genomic discoveries seems impressive. The announcement of TSO 500 partnerships with Bristol Myers Squibb, Kura Oncology, Myriad Genetics and Merck to promote extensive genomic profiling, as well as with Harvard Pilgrim Health Care to expand access to broad-spectrum genetic testing is a positive effect on the stock.
Zacks rank and stocks to consider
Illumina currently has a Zacks Rank # 5 (strong sales).
Some other stocks with a better ranking in the broader medical space are Abbott Laboratories ABT, Hologic, Inc. HOLX en IDEXX Laboratories, Inc. IDXX.
Abbott reported a $ 1.45 adjusted profit for the fourth quarter of 2020, surpassing the Zacks Consensus Estimate by 6.6%. Global sales of $ 10.7 billion in the fourth quarter exceeded the consensus point by 7.9%. The company currently has a Zacks Rank # 2 (Buy). You can see the complete list of today’s Zacks # 1 Rank (Strong Buy) shares.
Hologic reported $ 2.86 adjusted profit for the first quarter in the first quarter, beating the Zacks Consensus Estimate by 33.6%. The company currently boasts a Zacks Rank # 1.
IDEXX reported an adjusted profit of $ 2.01 for the fourth quarter of 2020, surpassing the Zacks consensus calculation by 40.6%. Revenue of $ 720.9 million reduced the consensus point by 5.8%. The company currently has a Zacks Rank # 2.
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