Will Ciena Stay Profitable This Quarter?

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On Thursday, Ciena will release its latest quarterly results. After having returned to profitability last quarter, the big question facing the stock is whether its earnings will dip back into the red in the coming report.

Ciena has suffered along with much of the rest of the networking industry, with ups and downs from changing trends among buyers of networking equipment. Overall, though, the company has done a good job of moving itself back to profitability, and investors are increasingly confident in Ciena's prospects going forward. Let's take an early look at what's been happening with Ciena over the past quarter and what we're likely to see in its report.

Stats on Ciena

Analyst EPS Estimate

($0.01)

Year-Ago EPS

$0.04

Revenue Estimate

$483.34 million

Change From Year-Ago Revenue

1.2%

Earnings Beats in Past 4 Quarters

2


Source: Yahoo! Finance.

How will Ciena's earnings fare this quarter?
Analysts have had generally favorable views of Ciena's long-term prospects in recent months. Although they've gone from calls for a break-even April quarter to a modest loss, they've raised their full-year fiscal 2013 estimates by $0.25 per share, and the stock has responded by rising more than 8% since the end of February.

Ciena started things off on the right foot, soaring after it reported favorable results in its previous quarter. Even in a tough environment for networking stocks, Ciena reported an unexpected profit on 9% higher revenue, as North American customers Verizon and AT&T have been working hard to broaden the reach of their 4G networking as they seek to fend off new competition from reinvigorated rivals in the U.S. telecom market. Ciena even saw some success in Europe, where economic woes continue to depress the sector in general.

Ciena hasn't been afraid to tackle opportunities wherever they arise. In March, the company was chosen by the private company SEACOM to help improve Internet capacity in Africa, with upgrades to its undersea network helping to provide greater speed and affordability for African users. Meanwhile, Ciena also inked a deal with XO Communications in April to help it deliver high-definition video content over XO's high-speed data network, and it ran a series of trials using the U.K. optical core network infrastructure of telecom company BT that Ciena said was the world's first 800G super-channel.

But the big deal for Ciena could come from Level 3 Communications , which is considering abandoning its relationship with Huawei to find an alternative optical networking partner. Because of national security concerns, Level 3 has a big incentive to go with Ciena or rival Infinera . The three-year deal could mean a big lift in profits for whichever company wins out, and so you can expect both Infinera and Ciena to lobby hard for Level 3's business.

In Ciena's quarterly report, watch for signs of how the company plans to pick up more business without giving up its pursuit of profits. Early indications suggest that the networking business might be starting to turn around more broadly, especially as Verizon starts to contemplate ways to take over full control of its Verizon Wireless joint venture and as AT&T seeks out new growth potential from a possible international expansion. For its part, Ciena appears to be in good position to take advantage from a pick-up in overall networking activity.

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The article Will Ciena Stay Profitable This Quarter? originally appeared on Fool.com.

Fool contributor Dan Caplinger has no position in any stocks mentioned. You can follow him on Twitter @DanCaplinger. The Motley Fool recommends Infinera. The Motley Fool owns shares of Infinera. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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