(By Rich Bieglmeier) Illumina Inc. (ILMN) is expectedto report earnings after the market closes on Tuesday, October 23, 2012. Wall Street anticipates that Illumina will earn $0.39 for its 3rd quarter. iStock expects biotech will report earnings that will exceed Wall Street's consensus number. The iEstimate is $0.40 – a 1 cent upside surprise.
Illumina is a leading developer, manufacturer, and marketer of life science tools and integrated systems for the analysis of genetic variation and function with four key applications: SNP Genotyping, Gene Expression Profiling, Epigenetics, and Proteomics.
In the last 16 earnings announcements, ILMN missed the street's consensus just one time. The biotech hit the target on five occasions and surpassed analysts' expectations 10 times. Shareholders were rewarded with gains in the days surrounding earnings 70% of the bullish surprises. The average gain for the lucky seven was 7.6%.
Overall, Illumina's stock price increased 10 of the last 16 earnings announcements, with an average gain of 8.72% in the days circling the news.
The one time the company missed in 2009, ILMN's price got hammered by 23%, ouch. For those keeping mental track, that leaves five quarters of hitting the mark. In three out of the five, the stock increased by 19.50%, 10.10% and 4.20%, respectively. The two disappointments chopped 1.8% and 16.10% from the biotech's value.
If the stock's recent performance is any indication, Wall Street might be betting against the 3rd quarter. In the last few days, the price has slumped from $52.50 to today's price. Fortunately, support at the 50-day average of $45.97 is nearby. Additionally, there is a wall of pivot-top resistance turned support at $45. A positive profit check up with robust, forward guidance could erase most of this week's losses.
If management disappoints, well, there is the one previous miss to look back on, -23.1%. Shareholders are certainly hoping the iEstimate is correct! Based on our technical take, if ILMN busts $39, timber… see you at as low as $33 – double ouch.
Illumina's most recent 10Q warned, "uncertainty surrounding the levels of government and academic research funding in the United States and Europe will continue in the second half of 2012 and into 2013, which could lead to purchasing delays and could negatively impact our business." iStock hasn't seen any slowdown in government spending, have you?
Sales for instruments fell in the second quarter by 32% for ILMN, which cased overall revenue to dip by 4%. That could correct in Q3 as discounts for an upgrade cycle should diminish, meaning margins could increase. There are also a couple of expenses that should drop in the upcoming announcement, moving their headquarters and legal cost related to an unsolicited takeover offer from Roche Holding for $51 per share. iStock doesn't mind the high R&D cost as it is an investment in the future.
iStock feels the potential mix of lower costs and higher selling prices should expand margins and increases the likelihood of a plus surprise. However, according to today's option activity, investors are lining up on the bearish side of the trade as 1,557 put contracts have traded with fewer than 400 calls purchased. This tells us that if our iEstimate is correct, it will surprise Wall Street and Illumina Inc. (ILMN
) could be greeted with a bullish reaction.