Is the Ciena Earnings Rebound for Real?
Ciena will release its quarterly report on Wednesday, and investors are hoping that the company can make it three quarters in a row of positive adjusted net income. As Ciena earnings have recovered, the stock's valuation has looked a lot more reasonable, even though the company still has a long way to go before it can declare its turnaround complete.
Ciena relies on the health of the market for high-speed networking, with its products helping customers create network infrastructure that optimizes the flow of data and information across their IT platforms. Spending in that area has been muted in recent years, but with signs of a comeback in IT spending, investors are hopeful that the result will be greater sales and profits for Ciena and its peers. 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
Change From Year-Ago Revenue
Earnings Beats in Past 4 Quarters
Source: Yahoo! Finance.
Will Ciena earnings stay positive?
Analysts have gotten much more optimistic in recent months about Ciena earnings, boosting their July quarter projections by a nickel per share and their full fiscal-year estimates by double that amount. The stock has climbed almost 20% just since late May.
Ciena started the quarter off on the right foot, announcing in early June an unexpected adjusted net profit in its April quarter. Even though JDS Uniphase and NeoPhotonics both soared in sympathy, Ciena CEO Gary Smith made the argument that his company should benefit more from a general rise in network-infrastructure building than its peers. Given that neither JDS Uniphase nor NeoPhotonics have reported particularly good results before or since the Ciena report, it's possible that Ciena has found a secret to success that its counterparts simply haven't.
Still, Ciena isn't the only company in the space having success. Finisar managed to post equally impressive results and posted further gains after guiding preliminary July quarter revenue and earnings estimates higher. The Ethernet side of Finisar's business has provided particular strength to the company overall, potentially pointing the way toward the direction Ciena should follow as well.
The key to Ciena's growth, though, will be the speed with which customers build out new networks. In late July, the Southern Cross Cable Network completed the implementation of Ciena 100G technology in its high-speed broadband network serving Australia and New Zealand. As demand rises around the world, Ciena needs to get its share of similar wins in order to keep growing.
In the Ciena earnings report, watch to see whether the company can keep posting outpaced growth compared to some of its peers. Another positive result could confirm that Ciena's strategy is giving it a competitive advantage over rival networking companies.
Networking moves data, and the amount of data we store every year is growing by a mind-boggling 60% annually! To make sense of this trend and pick out a winner, The Motley Fool has compiled a new report called "The Only Stock You Need to Profit From the NEW Technology Revolution." The report highlights a company that has gained 300% since first recommended by Fool analysts but still has plenty of room left to run. To get instant access to the name of this company transforming the IT industry, click here -- it's free.
Click here to add Ciena to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.
The article Is the Ciena Earnings Rebound for Real? 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 has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools don't 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.
Copyright © 1995 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.