Yahoo Finance Illumina (ILMN) Q1 Earnings Beat, Adjusted Operating Loss Widens
Illumina Inc. ILMN reported first-quarter 2024 adjusted earnings per share (EPS) of 9 cents, which beat the Zacks Consensus Estimate of 3 cents per share. The bottom line exceeded the year-ago quarter’s figure of 8 cents.
The adjustments exclude the impact of GRAIL’s pre-acquisition net operating losses on GILTI, the utilization of U.S. foreign tax credits and the Pillar Two global minimum top-up tax, which became effective in the first quarter of 2024, among others.
Including one-time items, the company’s GAAP loss per share was 79 cents compared to the year-ago quarter’s EPS of 2 cents.
Revenues
In the quarter under review, Illumina’s revenues were $1.08 billion, down 1% year over year (down 1% at CER). However, the top line surpassed the Zacks Consensus Estimate by 2.1%.
Segment Details
Illumina has two reportable segments — Core Illumina and GRAIL.
Core Illumina sequencing service and other revenues were $151 million (up 27% year over year). This was driven primarily by an increase in revenues from strategic partnerships and higher instrument service contract revenues on a growing install base.
Sequencing Instrument revenues for Core Illumina of $110 million declined 29% year over year. This was due to an expected decline in mid-throughput shipments as capital and cash flow constraints continue to impact purchasing behavior and moderate instrument placements. Additionally, a lower number of NovaSeq X placements compared to significant pre-order launch-related shipments in the first quarter of 2023 led to the decline.
Illumina, Inc. Price, Consensus and EPS Surprise
Illumina, Inc. price-consensus-eps-surprise-chart | Illumina, Inc. Quote
Core Illumina sequencing consumables revenues of $698 million were up 1% year over year, primarily due to growth in high throughput.
GRAIL contributed $27 million to revenues in the reported quarter compared with $20 million in the year-ago period.
Margins
The adjusted gross margin (excluding amortization of acquired intangible assets) was 66.5% in the reported quarter, an expansion of 178 basis points (bps) year over year.
Research and development expenses decreased 0.6% year over year to $339 million. SG&A expenses were $439 million compared with $378 million in the year-ago quarter. Adjusted operating costs increased 8.2% to $778 million. The adjusted operating loss in the quarter was $63 million, higher than the 2023 comparable period loss of $16 million.
Financial Update
Illumina exited the first quarter with cash and cash equivalents of $1.11 billion compared with $1.05 billion at the end of 2023.
Cumulative net cash provided by operating activities at the end of the first quarter was $77 million compared with $10 million a year ago.
2024 Guidance
Illumina reaffirmed its outlook for 2024, which was originally issued on the fourth-quarter 2023 earnings call.
Core Illumina revenues are expected to be flat year over year (unchanged) and a Core Illumina non-GAAP operating margin of approximately 20% (same as earlier).
Key Announcements
Throughout the first quarter, Illumina made headlines on many occasions. The company released XLEAP-SBS chemistry on NextSeq 1000 and NextSeq 2000 Systems and launched Illumina Complete Long Reads (ICLR) with Enrichment — a flexible, cost-effective solution to enhance the coverage of known challenging-to-map regions with targeted long reads where they provide the most value.
The company is also moving forward with its plan to divest GRAIL either through a sale or a capital markets transaction, aiming to finalize terms by the end of the second quarter of 2024. The European Commission approved Illumina's divestment plan in April. Illumina is required to provide GRAIL with around $1 billion in funding if the divestiture occurs through a capital markets transaction.
Our Take
Illumina delivered better-than-expected earnings and revenues in the first quarter of 2024. The company’s innovative solutions are facilitating the next wave of progress in genomics and multiomics. Illumina continues to make significant progress in executing its three key priorities for value creation across the organization. The expansion of the gross margin during the quarter is impressive.
Meanwhile, the company posted a significantly higher operating loss. Illumina continues to navigate a challenging global macro environment where customers are still constrained in their purchasing decisions.
Zacks Rank & Key Picks
Illumina currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks from the broader medical space are Medpace MEDP, TransMedics Group TMDX and Encompass Health Corporation EHC.
Medpace, sporting a Zacks Rank #1 (Strong Buy), reported a first-quarter 2024 EPS of $3.20, which beat the Zacks Consensus Estimate by 30.6%. Revenues of $511 million improved 17.7% from last year’s comparable figure. You can see the complete list of today’s Zacks #1 Rank stocks here.
Medpace has an estimated 2024 earnings growth rate of 26.5% compared with the industry’s 12.3%. The company’s earnings surpassed estimates in each of the trailing four quarters, the average being 12.8%.
TransMedics Group, carrying a Zacks Rank #2 (Buy), reported a first-quarter 2024 EPS of 35 cents compared to the Zacks Consensus Estimate of a loss of 5 cents. Revenues of $96.9 million outpaced the Zacks Consensus Estimate by 16.2%.
TMDX has an estimated 2024 earnings growth rate of 81.8% compared to the industry’s 14.4%. The company surpassed earnings estimates in each of the trailing four quarters, the average being 290.8%.
Encompass Health, carrying a Zacks Rank #2, reported a first-quarter 2024 adjusted EPS of $1.12, which surpassed the Zacks Consensus Estimate by 20.4%. Net operating revenues of $1.3 billion topped the Zacks Consensus Estimate by 3.6%.
EHC has an estimated long-term earnings growth rate of 15.6% compared with the industry’s 11.7% growth. The company’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 18.7%.
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