What’s in Store for Pacific Biosciences’ (PACB) Q2 Earnings?

Pacific Biosciences of California, Inc.’s PACB second-quarter 2018 results are scheduled to release on Aug 2, after market close. While the company’s flagship Sequel System, also known as PacBio Sequel, is likely to drive growth, headwinds in the APAC region may persist.

In the last reported quarter, the company reported adjusted loss of 20 cents per share, which was wider than the Zacks Consensus Estimate by a penny. Revenues in the quarter grossed $19.4 million, which missed the Zacks Consensus Estimate by 21.1%.

For the quarter to be reported, the Zacks Consensus Estimate is pegged at a loss of 17 cents. The same for revenues is pinned at $23.6 million, showing a rise of 17.8%.

Pacific Biosciences reported an average negative earnings surprise of 0.8% in the trailing four quarters.

Let’s delve deeper.

PacBio Sequel in Focus

Pacific Biosciences’ flagship platform — the Sequel system — has been fortifying the company’s footprint worldwide. It has been a significant contributor to the company’s top line.

The last reported quarter witnessed the strongest bookings of the Sequel Systems. This modestly drove the company’s consumable revenues in the first quarter.

Moreover, most of the large multi-unit sequel orders came from China, driven by planned animal sequencing projects. Management expects such activities to expand in Europe apart from the United States.

Of late, the platform has seen a slew of developments. Earlier this year, Alabama-based HudsonAlpha Institute for Biotechnology started using the advanced Sequel Sequencing System. Per management, HudsonAlpha is also expanding the use of their products into human clinical research. In fact, in the last reported quarter, the company purchased another Sequel system. (Read More: Pacific Biosciences Gains as HudsonAlpha Picks Sequel System)

Furthermore, in the recent past, the company announced a new version of Sequel Software (V5.1) and a new polymerase. (Read More: Pacific Biosciences Unveils New Version of Sequel Software)

Other Factors to Consider

Product Development Activities

In the last reported quarter, Pacifc Biosciences released sequencing enzyme and software for the Sequel System. Notably, this has been successfully rolled out to most of the company’s clients. Per management, the company eyes the launch of a software later this year along with further enhancements to sequence analysis programs.

Last month, Pacific Biosciences showcased new multiplexing sequencing tools at the upcoming American Society for Microbiology (“ASM”) annual meeting in Atlanta. (Read More: Pacific Biosciences to Gain From New Genome Sequencing Tools)

APAC Headwinds

In the last reported quarter, Pacific Biosciences’ consumable revenues were partially offset by reduced consumable usage in Asia. Per management, a significant number of the company’s large users in Asia stopped usage earlier this year.

We expect the trend to continue in the quarters ahead which is likely to mar the company’s prospects.

Competition

The DNA sequencing market is highly competitive owing to the presence of established players like Illumina and Thermo Fisher Scientific Inc. Moreover, Pacific Biosciences is a relatively small company compared to these second-generation sequencing technology firms, which acts as a deterrent.

What Our Model Predicts

Although Pacific Biosciences carries a Zacks Rank #2 (Buy), it does not have a positive Earnings ESP needed for increasing the odds of an earnings beat.

Earnings ESP for Pacific Biosciences is -2.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks Worth a Look

Here are a few medical stocks worth considering as they have the right combination of elements to post an earnings beat.

The Cooper Companies, Inc. COO has an Earnings ESP of +1.53% and a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Teleflex Incorporated TFX has an Earnings ESP of +0.34% and a Zacks Rank #3.

PerkinElmer, Inc. PKI has an Earnings ESP of +1.03% and a Zacks Rank #3.

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