Illumina Inc. ILMN is set to report its first-quarter 2015 results on Apr 21. Last quarter, the company had posted a solid positive earnings surprise of 11.5%.
In fact, over the past four quarters, Illumina’s earnings have outpaced the Zacks Consensus Estimate with an average beat of 20.3%. Let’s see how things are shaping up for 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 ingredients.
Zacks ESP: Illumina has a positive Earnings ESP of +1.39%.That is because the Most Accurate estimate stands at 73 cents while the Zacks Consensus Estimate is pegged lower at 72 cents. This is very meaningful and a leading indicator of a likely positive earnings surprise.
Zacks Rank: Illumina has a Zacks Rank #3 (Hold). Note that stocks with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 have a significantly higher chance of beating earnings estimates. Conversely, Sell-rated stocks (Zacks Rank #4 or 5) should never be considered going into an earnings announcement.
The combination of Illumina’s Zacks Rank #3 and +1.39% ESP makes us confident of a positive earnings beat at the company.
What is Driving the Better than Expected Earnings?
Illumina is one of the leading companies in the multi-billion dollar next generation sequencing (NGS) market based on its growing product portfolio and pipeline. The company continues to launch new products that are expected to provide it a competitive edge in 2015 and beyond.
During the recently completed first quarter, Illumina launched MiSeq FGx Forensic Genomics System, NeoPrep Library Prep System and TruSight HLA Solution.
The MiSeq FGx System is the first fully approved NGS system designed specifically for forensic genomic applications. This has definitely raised the company’s value in the forensic DNA analysis space.
The NeoPrep System delivers reliable, easy-to-use high-quality DNA and RNA libraries with almost 85% lesser pipetting required to prepare libraries when compared to manual library prep methods.
On the other hand, the TruSight HLA refers to an end-to-end solution that provides efficient, highly accurate sequencing of Human Leukocyte Antigen (HLA) region of the genome.
We believe these latest additions to its ever expanding line of sequencing portfolio will enable Illumina to expand its access in oncology, reproductive health, forensics, microbiology and other key markets. This, in turn, should boost revenues at the company from its sequencing systems, during the first quarter.
Although, government budget cuts, including NIH funding issues and foreign exchange headwinds were the major downsides, strong worldwide demand and solid contributions from the sequencing business are expected to overcome the headwinds for Illumina.
Other Stocks to Consider
Here are some other companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:
Biogen Inc. BIIB, earnings ESP of +0.26% and a Zacks Rank #1.
Mirati Therapeutics, Inc. MRTX, earnings ESP of +10.81% and a Zacks Rank #2.
MEI Pharma, Inc. MEIP, earnings ESP of +3.45% and a Zacks Rank #2.
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