Illumina (ILMN) Q2 Earnings Top Estimates, 2021 View Up

Illumina (NASDAQ:ILMN), Inc.’s ILMN second-quarter 2021 adjusted earnings per share (EPS) of $1.87 surpassed the Zacks Consensus Estimate by 37.5%. Moreover, the bottom line improved a stupendous 201.6% from the year-ago quarter’s earnings of 62 cents a share.

The adjustments exclude certain amortization costs, expense and benefit related to COVID-19 and restructuring costs among others.

Including one-time items, the company’s GAAP EPS was $1.26, surging 168.1% year over year.

Revenues

In the quarter under review, Illumina’s revenues were $1.13 billion, up 77.9% year over year. The top line also exceeded the Zacks Consensus Estimate by 11.3%.

The second-quarter revenues were also up 3% from the prior quarter’s level.

Segment Details

Sequencing Consumable revenues totaled $704 million in the reported quarter, up 82% year over year on record NovaSeq consumable shipments with robust demand driven by v1.5 flow cells. NovaSeq shipments more than doubled on a year-over-year basis, driven by continued adoption by new to high-throughput customers.

Illumina, Inc. Price, Consensus and EPS Surprise

Illumina, Inc. Price, Consensus and EPS Surprise

Illumina, Inc. price-consensus-eps-surprise-chart | Illumina, Inc. Quote

Sequencing Instrument revenues were $189 million, reflecting a surge of 115% from the year-ago figure,reflecting another quarter of significant strength across all instrument categories.

Sequencing service and other revenues were $128 million, up 41% from the year-ago quarter. In the quarter, the company reported approximately $20 million of one-time revenues recognized from NIPT royalties received related to a patent litigation settlement.

Margins

Adjusted gross margin (excluding amortization of acquired intangible assets) was 71.9% in the reported quarter, highlighting an expansion of 313 basis points (bps) year over year.

Research and development expenses increased 30.3% year over year to $202 million, whereas selling, general & administrative expenses rose 133.3% to $413 million. These pushed up operating costs by 85.2% to $615 million.

Adjusted operating income in the quarter was $194 million, up 88.3% from the year-ago income. Adjusted operating margin came in at 17.2%, reflecting an expansion of 96 bps year over year.

Financial Update

Illumina exited the second quarter of 2021 with cash and cash equivalents plus short-term investments of $4.29 billion compared with $4.63 billion at the end of the first quarter.

The company did not repurchase any common stock in the quarter.

Cumulative net cash provided by operating activities at the end of the second quarter of 2021 was $535 million compared with $521 million a year ago.

2021 Guidance Raised

Illumina raised its revenue growth guidance for 2021, indicating a surge of 32-34% from 2020 (up from its earlier growth guidance of 25-28%). The Zacks Consensus Estimate for the same is currently pegged at $4.15 billion.

Adjusted EPS for 2021 is projected in the range of $6.30-$6.50 (up from $5.80-$6.05). The Zacks Consensus Estimate for the same is currently pegged at $6.06.

Our Take

Illumina exited the second quarter with better-than-expected results. The gradually improving business conditions buoy optimism on the stock. Year-over-year robust improvement in segmental revenues across all geographies significantly exceeded the company’s expectations.

In clinical markets, oncology, reproductive health and genetic disease testing are expanding as reimbursement coverage increases, patient awareness grows and more sequencing applications enter the clinic. Ramping up of population sequencing programs are contributing to the robust growth within research business.

The raised 2021 guidance is encouraging too, indicating that this bullish trend is likely to continue through the rest of the year.

Zacks Rank & Key Picks

Illumina currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader medical space that have announced their quarterly results are Encompass Health (NYSE:EHC) Corporation EHC, West Pharmaceutical Services (NYSE:WST), Inc. WST and Bruker (NASDAQ:BRKR) Corporation BRKR, each sporting a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Encompass Health reported second-quarter 2021 adjusted EPS of $1.17, which beat the Zacks Consensus Estimate by 15.8%. Second-quarter revenues of $1.3 billion outpaced the consensus mark by 1.5%.

West Pharmaceutical reported second-quarter 2021 adjusted EPS of $2.46, which surpassed the Zacks Consensus Estimate by 41.4%. Second-quarter revenues of $723.6 million outpaced the Zacks Consensus Estimate by 8.7%.

Bruker reported second-quarter 2021 adjusted EPS of 44 cents, surpassing the Zacks Consensus Estimate by 10%. Revenues of $570.8 million surpassed the Zacks Consensus Estimate by 6.1%.

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