Illumina Inc. ILMN reported adjusted earnings per share (EPS) of 71 cents in the first quarter of 2016 that missed the Zacks Consensus Estimate by 3 cents. Adjusted earnings also deteriorated from the year-ago number by 21.9%.A sluggish first-quarter top-line performance that remained behind the company’s revenue expectation mark primarily led to the year-over-year deterioration in Illumina’s first-quarter adjusted EPS. Moreover, the quarterly adjusted EPS included a dilution of 4 cents and 2 cents from the company’s GRAIL and Helix investment, respectively.Including one-time items, the company reported earnings of 60 cents per share, reflecting a massive 34.8% plunge from the prior-year quarter figure. Illumina Inc. (ILMN) EPS BNRI & Surprise Percent - Last 5 Quarters | FindTheCompany RevenuesIn the reported quarter, Illumina's revenues grew 6% year over year (up 7% at constant exchange rate or CER) to $571.8 million, lower than the company’s expectation. The top line also remained way below the Zacks Consensus Estimate of $581 million.According to Illumina, there were two key contributors to the first-quarter shortfalls. The first one is orders booked that did not translate to revenue based on a number of factors. The other contributor was certain HiSeq orders that were anticipated but not received, causing $9 million of the shortfall. Consequently, Illumina shipped 19 fewer HiSeq 2500, HiSeq 3000 and HiSeq 4000 instruments than anticipated. This has led to flat year-over-year placements.Revenues by Business CategoriesProduct revenues (84.4% of total revenue) surged 5.2% year over year to $482.8 million. Within this business, revenues from consumables were up 17% at $361 million on account of higher demand for sequencing consumables. Instrument revenue fell 20% to $118 million on more than $30 million of decline, given the large HiSeq X shipments in the first quarter last year.Service and Other (15.6%) revenues climbed 12% year over year to $89 million. The year-over-year improvement was primarily owing to extended maintenance contracts associated with the largest sequencing installed base and genotyping services, partially offset by a decline in NIPT service revenue, given the shift to in-house testing as expected.Operational UpdateIllumina's adjusted gross margin (considering stock-based compensation as regular expense) came in at 71.2%, a contraction of 100 basis points (bps) year over year, as the benefit of favorable consumables mix was offset by lower absorption.Adjusted research and development (R&D) expenses rose 35.2% year over year (to $124.1 million) and adjusted selling, general & administrative (SG&A) expenses spiked 28.1% (to $147.1 million). Consequently, adjusted operating margin of 23.9% deteriorated 950 bps from the year-ago period, hit by a lower gross margin and higher operating expenses in the reported quarter.Financial UpdateIllumina exited the first quarter of 2016 with cash and cash equivalents and short-term investment of $1.34 billion, down from $1.39 billion as of Jan 2016. Illumina generated $39.7 million in cash flow from operations in the first quarter, reflecting a 40.6% drop from $66.8 million a year ago.2016 GuidancePost a disappointing first quarter, Illumina has reduced its earlier provided guidance for 2016. The company currently expects to deliver revenue growth of 12% (earlier expectation was 16% growth). According to Illumina, apart from a poor first-quarter top-line performance, the additional decline in 2016 guidance is the result of its lowered outlook for Europe, which went from high-teens growth to low-single digits to mid-single digits, including a smaller contribution than planned from the Genome England. On the bottom-line front, the company expects to deliver adjusted EPS in the range of $3.35–$3.45 ($3.55–$3.65).For the second quarter, Illumina projects revenues of $590–$595 million and adjusted EPS in the range of 72–74 cents.Our TakeIllumina ended the first quarter on a disappointing note with both the top and bottom lines lagging behind the respective Zacks Consensus Estimate. Order-related shortfall in the quarter remained a cause of worry. We are also concerned about the dismal performance in Europe which led to a disappointing outlook for country, a prime reason for Illumina’s 2016 guidance reduction for the remainder of the year.However, on an encouraging note, orders of over $700 million in the quarter significantly beat the company’s expectations. In addition, the company added four new customers, bringing the total number to 31. The company’s strong cash balance position further bolsters our confidence in the stock. Going forward, the company’s recently developed company – GRAIL, which focuses on the cancer screening market, is expected to expand Illumina’s share in the multi-billion dollar oncology market.Zacks RankCurrently, Illumina has a Zacks Rank #4 (Sell). Some better-ranked medical stocks are ANI Pharmaceuticals, Inc. ANIP, Cambrex Corporation CBM and OncoMed Pharmaceuticals, Inc. OMED. All the three stocks sport a Zacks Rank #1 (Strong Buy).Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report ILLUMINA INC (ILMN): Free Stock Analysis Report CAMBREX CORP (CBM): Free Stock Analysis Report ONCOMED PHARMA (OMED): Free Stock Analysis Report ANI PHARMACEUT (ANIP): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research