Pacific Biosciences (PACB) Q4 Loss Narrows, Consumables Up

Pacific Biosciences of California Inc. PACB reported a loss of 18 cents per share in the fourth quarter of 2017, a penny narrower than the Zacks Consensus Estimate. Also, the figure was 14.2% narrower than the year-ago quarter’s reported loss of 21 cents. Strength in China and Asia contributed to the company’s bottom-line improvement in the reported period.

For the full year, reported loss per share was 87 cents, 4.8% wider than the year-ago tally of 83 cents.

Fourth-quarter revenues of $24.9 million exceeded the Zacks Consensus Estimate of $22 million but dipped 3.1% on a year-over-year basis. Notably, the DNA sequencing market is highly competitive due to presence of several established players. Cutthroat competition in the niche space is the primary reason for the year-over-year top-line decline.

Segment Details

Product revenues rose 5.9% to almost $21.8 million. Service and Other revenues deteriorated 18.3% from the year-earlier quarter to almost $3.1 million. Total $24.9 million of product, service and other revenues in the fourth quarter were 2% higher than the prior-year number.

Pacific Biosciences of California, Inc. Price, Consensus and EPS Surprise

Pacific Biosciences of California, Inc. Price, Consensus and EPS Surprise | Pacific Biosciences of California, Inc. Quote

 

Consumable revenues in the quarter under review were $12.7 million, up 70% on a year-over-year basis, marking the metric’s eighth consecutive quarter of growth on continued consumable sales momentum. This upside was driven by an increased utilization of the company’s growing installed base of sequel systems.

Instrument revenues in the fourth quarter were $9.2 million, down from $13.1 million on a year-over-year basis as higher shipments of instruments took place in the latter part of 2016 and early 2017.

The company has no record of contractual revenues in the quarter.

Margin Details

In the fourth quarter, Pacific Biosciences generated gross profit of $9.5 million. As a percentage of revenues, gross margin in the quarter was 38.1%, down 610 basis points year over year.

Operating expenses in the fourth quarter of 2017 totaled $30 million compared with $29.2 million on a year-over-year basis. R&D expenses in the quarter totaled $15.6 million, down from $16.3 million a year ago. Selling, general and administrative expenses in the period were $14.4 million compared with $12.9 million in the fourth quarter of 2016. The company incurred $20.5 million of operating loss in the quarter, wider than the loss of $17.8 million a year ago.

Financial Update

Cash and investments at the end of 2017 was $62.9 million compared with $71.9 million at 2016-end.

Outlook

Banking on a better-than-expected fourth-quarter show, Pacific Biosciences expects its 2018 revenues to grow 20% from the year-ago figure, translating to approximately $112 million in total revenues. For the near term, the company anticipates first-quarter 2018 revenues to be slightly lower than the reported count in fourth-quarter 2017 due to seasonality.

Our Viewpoint

Pacific Biosciences ended the fourth quarter of 2017 on a promising note. Consumable revenue platform acted as a significant positive for Pacific Biosciences in the quarter. Sales momentum in China continued to remain strong on the company’s recent receipt of an order for 10 sequel systems from the premier sequencing service provider, BGI. The outlook for 2018 looks encouraging as well.

Of the major concerns, the DNA sequencing market breeds stiff competition with several established players dominating the market. Aggressive rivalry in this niche space is a headwind. Also, higher operating expenses are likely to mar prospects.

The company has a Zacks Rank #3 (Hold).

Companies Reporting Solid Earnings Results

A few better-ranked stocks that reported solid earnings this season are PetMed Express PETS, PerkinElmer PKI and Accuray ARAY. While PetMed sports a Zacks Rank #1 (Strong Buy), PerkinElmer and Accuray carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

PetMed recently announced third-quarter fiscal 2018 results with adjusted earnings per share of 44 cents. The bottom line soared 88.3% year over year. Revenues in the reported quarter rose 13.7% on a year-over-year basis to $60.1 million.

PerkinElmer released fourth-quarter 2017 adjusted earnings per share of 97 cents. Adjusted revenues were approximately $641.6 million, up from $567 million in the year-ago quarter.

Accuray reported a loss of 6 cents per share in second-quarter fiscal 2018, narrower than the year-ago figure by 5 cents. The top line improved 15% year over year to $100.3 million.

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