Yahoo Finance Illumina (ILMN) Q4 Earnings Miss Estimates, Gross Margin Down
Illumina Inc.'s ILMN adjusted earnings per share (EPS) of 14 cents in fourth-quarter 2022 lagged the Zacks Consensus Estimate by 26.3%. The bottom line declined 81.3% from the year-ago quarter’s earnings of 75 cents.
The company’s GAAP loss per share was 89 cents against the year-ago quarter’s EPS of 71 cents.
For the full year, adjusted earnings were $2.12 per share, down 64% from the year-ago period’s levels. The figure also missed the Zacks Consensus Estimate by 5.4%.
Revenues
In the quarter under review, Illumina’s revenues were $1.08 billion, down 9.6% year over year. However, the top line beat the Zacks Consensus Estimate by 1.5%.
Total revenues for 2022 were $4.58 billion, up 1.3% rise from the year-ago period’s levels. The figure beat the Zacks Consensus Estimate by 0.4%.
Segment Details
Post the acquisition of GRAIL on Aug 18, 2021, Illumina has two reportable segments — Core Illumina and GRAIL.
Core Illumina revenues fell 11% year over year (down 8% at the constant exchange rate or CER) to $1.07 billion. Core Illumina Sequencing Consumable revenues totaled $687 million in the reported quarter, down 13% year over year.
Sequencing Instrument revenues for core Illumina were $146 million, down 24% from the year-ago quarter’s figure. The decline was primarily due to lower NovaSeq 6000 shipments in advance of the availability of NovaSeq X. The decline was partially offset by another quarter of record NextSeq 1000/2000 shipments.
Illumina, Inc. Price and EPS Surprise
Illumina, Inc. price-eps-surprise | Illumina, Inc. Quote
Core Illumina sequencing service and other revenues were $131 million, up 24% year over year on higher instrument service contract revenues on a growing installed base and an increase in oncology and IBD partnership revenue.
GRAIL contributed $23 million to revenues during the reported quarter.
Margins
The adjusted gross margin (excluding amortization of acquired intangible assets) was 66.5% in the reported quarter, highlighting a contraction of 505 basis points (bps) year over year.
Research and development expenses plunged 1.1% year over year to $346 million, whereas selling, general & administrative expenses rose 1.4% to $432 million. These pulled up adjusted operating costs by 0.3% to $778 million.
Adjusted operating loss in the quarter was $58 million against the prior-year quarter’s adjusted operating income of $81 million.
Financial Update
Illumina exited 2022 with cash and cash equivalents plus short-term investments of $2.04 billion compared with $1.34 billion at the end of 2021.
The company did not repurchase any common stock in the quarter.
Cumulative net cash used in operating activities at the end of 2022 was $39.2 million compared with $54.5 million a year ago.
2023 Guidance
For 2023, Illumina expects its consolidated revenue growth in the range of 7 to 10% year over year. The Zacks Consensus Estimate for the same is currently pegged at $4.99 billion.
The company expects adjusted EPS for 2023 in the range of $1.25 to $1.50. The Zacks Consensus Estimate for the same is currently pegged at $2.26.
Core Illumina revenue growth is expected in the range of 6-9%. GRAIL revenues are expected to be in the range of $90 million to $110 million.
Our Take
Illumina ended 2022 on a mixed note with lower-than-expected earnings and revenues beat. The year-over-year performance remained sluggish. Sequencing instruments revenue for core Illumina declined due to delayed recruitment for some large research projects in the Americas and Europe, the ongoing impact of COVID disruptions in China, the year-over-year impact of customer inventory management, the anticipated decline in COVID surveillance revenues and headwinds from foreign exchange rates. The base business in regions was impacted by anticipation for NovaSeq X and the slowdown in COVID surveillance and research. Contraction in gross margin is discouraging.
On a positive note, Illumina registered another quarter of record NextSeq 1000/2000 shipments as the company continues to witness strong adoption. Further, Core Illumina sequencing service and other revenue rose year-over-year, driven primarily by higher instrument service contract revenue on a growing installed base as well as an increase in oncology and IBD partnership revenue.
Zacks Rank and Other Key Picks
Illumina currently carries Zacks Rank #5 (Strong Sell).
Some other top-ranked stocks in the broader medical space that have announced quarterly results are Neogen Corporation NEOG, McKesson Corporation MCK and Hologic, Inc. HOLX.
Neogen, carrying a Zacks Rank #2, reported second-quarter fiscal 2023 adjusted EPS of 15 cents, beating the Zacks Consensus Estimate of a loss of 8 cents per share. Revenues of $230 million outpaced the consensus mark by 0.9%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Neogen has an earnings yield of 2.5% compared with the industry’s 0.2%. NEOG’s earnings surpassed estimates in two of the trailing four quarters and missed the same in two, the average being 70.11%.
McKesson, having a Zacks Rank #2, reported third-quarter 2023 adjusted EPS of $6.90, which beat the Zacks Consensus Estimate by 8.8%. Revenues of $70.49 billion outpaced the consensus mark by 0.02%.
McKesson has a long-term estimated growth rate of 10.1%. MCK’s earnings surpassed estimates in two of the trailing four quarters and missed the same in two, the average being 4.79%.
Hologic reported first-quarter 2023 adjusted earnings of $1.07 per share, beating the Zacks Consensus Estimate by 18.9%. Revenues of $1.07 billion surpassed the Zacks Consensus Estimate by 9.5%. It currently sports a Zacks Rank #1.
Hologic has a long-term estimated growth rate of 15.2%. HOLX’s earnings surpassed estimates in the trailing four quarters, the average surprise being 46.08%.
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