Major market benchmarks ended July in positive territory. The Dow Jones Industrial Average (DJINDICES:^DJI) and the S&P 500 (SNPINDEX:^GSPC) each added about a half-percent and finished with gains for the month.
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The industrial sector bounced back from trade worries on a report that the U.S. and China could return to trade discussions, and the Industrial Select SPDR ETF (NYSEMKT:XLI) rose 2.2%. Financial stocks fell as the Federal Reserve began its two-day policy meeting; the Financial Select Sector SPDR ETF (NYSEMKT:XLF) lost 0.7%.
Illumina jumps on strong consumable sales
Gene-sequencing leader Illumina delighted investors with expectation-beating second-quarter results and a substantial raise in its full-year guidance, and shares rose 12.1%. Revenue grew 25.4% to $830 million and non-GAAP earnings per share jumped 74.4% to $1.43. Analysts were expecting the company to earn $1.11 per share on sales of $787 million.
Illumina's surge in growth was largely due to stronger-than-expected demand for sequencing consumables, which grew sales by 35% to $455 million. Instrument sales of $127 million were 7% lower than the period last year, but service revenue increased 32% to $157 million. Sales in the Americas jumped 19%, but Asia-Pacific revenue soared 32% on a 42% boost in sales to China. Non-GAAP gross margin improved to 70.3% from 69% in Q2 last year.
Looking ahead, the company expects full-year sales to grow 20%, well above the 15% to 16% range it guided to three months ago. The forecast for non-GAAP EPS was raised to $5.35 to $5.45, a 12.5% boost from earlier guidance, and well above the $4.87 analysts had been expecting.
Illumina is seeing stronger consumable demand from buyers of its newer NovaSeq instruments than it expected, as well as robust growth in both research- and consumer-oriented applications. Good execution and an improved outlook had investors cheering today.
IPG Photonics predicts slowing growth
Shares of fiber laser maker IPG Photonics plunged 26.9% after the company reported results that were within its guidance range but below analyst expectations. Revenue grew 12% to $413.6 million, compared to guidance of $400 million to $430 million and the analyst consensus of $419 million. Earnings per share jumped 15.7% to $2.21, $0.01y above the midpoint of its forecast, but below the $2.25 that Wall Street was looking for.
New guidance was significantly below expectations. The company expects Q3 revenue to be between $360 million and $390 million, compared with the analyst consensus of $425 million, and EPS to be between $1.80 and $2.05, well below expectations of $2.27. Full-year revenue growth is now forecast to be between 7% and 9%, while analysts were looking for 14%.
IPG is seeing a slowing of order growth, which it blames on factors outside its control. "While orders grew slightly on a year over year basis, order flow was below our target as demand softened in Europe and China at the end of the quarter," said CEO Dr. Valentin Gapontsev. "This more modest year over year growth in orders has persisted through July, and we believe is primarily driven by macroeconomic and geopolitical factors rather than competitive dynamics."
IPG said that uncertainties in global macroeconomic trade and the geopolitical environment were near-term headwinds, but the company still has multiple potential growth drivers for the long term. Still, investors didn't like the big negative surprise from a company that has regularly beat expectations in recent years.