Illumina stock tanks after profit warning

Illumina ($ILMN) issued a profit warning due to poor sales of its NextSeq Series Desktop Sequencer as well as weakness in Europe and Japan, sending its stock tumbling 10% for the day. The company expects earnings per share to fall below consensus expectations, consistent with a 3% revenue shortfall.

The company expects Q3 revenue to be $550 million, a 14% increase year-over-year (18% at constant currencies). Illumina did not disclose earnings per share because it has not yet completed the close process. With expected revenues in Q4 of about $570 million, 2015 revenue growth is projected at 18%, below a hoped-for 20%.

Illumina CEO Jay Flatley

"The continued growth in NextSeq that we have projected did not materialize in Q3. We're confident this is not due to a change in the competitive dynamics, and heading into Q4, our desktop instrument pipeline is stronger than it was entering the third quarter. We're continuing to add to our sales team and are heightening our focus on the desktop segment. Additionally, we're actively working to source new-to-NGS customers with campaigns promoting the ease-of-use and our expanded targeting resequencing capabilities, which we'll highlight at ASHG (the American Society of Human Genetics meeting) later this week," Illumina CEO Jay Flatley said during a conference call.

Earnings in the Americas grew 22% year over year, but that was offset by a poor performance in Europe where revenues grew 6% year over year "primarily due to numerous forecasted deals slipping out of the quarter or closing too late to be recognizable as revenue."

Meanwhile revenue was virtually unchanged in Asia because Japanese shipments declined $6 million from previous quarter. "We're in the process of searching for a new leader in Japan to improve our execution as the funding environment recovers over the next couple of quarters," Flatley said.

On the plus side, sales of sequencing consumables grew 36% year over year to about $270 million, and revenues from the high-end HiSeq sequencing systems exceeded expectations.

But that information is shrouded by the disappointing overall performance. Clearly, the stock price reflected outsized growth expectations that even 14% revenue growth could not satisfy.

It will be the second poor quarter in a row. Following July news of Q2 earnings of $539.5 million (an increase of 20% year over year), below expectations of $542.1 million, the stock fell about 10%.

Flatley did not take questions following his most recent speech. Those will be taken during what promises to be a dispiriting earnings call on October 20.

- read the release