On Dec 7, 2015, we issued an updated research report on California-based life sciences company – Illumina Inc. ILMN. Using its proprietary technologies, the company offers innovative sequencing and array-based solutions for analysis of genetic variation and function.
Illumina ended the third quarter of 2015 on a mixed note. The company’s bottom line comfortably exceeded the Zacks Consensus Estimate, while the top line was on par with the same. Illumina’s reduced full year 2015 guidance for both earnings and revenues disappoints us, hinting at management’s anticipation of a lag on the growth trajectory.
Moreover, with its sales offices located in Europe, the Asia-Pacific region, and Brazil, as well as manufacturing facilities in Singapore, Illumina’s overseas business remains highly exposed to foreign currency fluctuations. In the third quarter, foreign exchange headwinds affected the company’s adjusted EPS by approximately 5 cents.
The company’s fourth-quarter revenue expectation includes a $10 million currency headwind compared to the prior-year quarter, indicating little respite in this regard, in the near term. Illumina continues to expect a negative impact of 3% on revenue growth in 2015, owing to foreign exchange headwinds.
Further, government budget cuts, including NIH funding issues, and the tough competition that Ilumina faces in the sequencing, SNP genotyping, gene expression and molecular diagnostics markets from several large existing players, continue to weigh on the stock.
On a brighter note, Illumina’s recent product launches including TruSight HLA solutions and Tumor 15 and strategic collaborations like the one with Amoy Diagnostics (to expedite the adoption of precision medicine and targeted therapies in China) are expected to add value. Moreover, the recent expansion observed in Illumina’s business across the globe is encouraging.
Currently, Illumina carries a Zacks Rank #4 (Sell).
Key Picks in the Sector
Some better-ranked med-biomed/generic stocks at the moment are Anika Therapeutics Inc. ANIK, Baxalta Incorporated BXLT and Heska Corporation HSKA. All the three stocks sport a Zacks Rank #1 (Strong Buy).
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