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Ciena (CIEN) Down 4.6% Since Last Earnings Report: Can It Rebound?
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A month has gone by since the last earnings report for Ciena (CIEN - Free Report) . Shares have lost about 4.6% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Ciena due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Ciena Swings to Earnings in Q1 on Higher Revenues
Ciena reported healthy first-quarter fiscal 2019 (ended Jan 31, 2019) financial results wherein both the top line and bottom line improved year over year. This was driven by solid execution of operational strategies, including diversifying business and leveraging global scale.
Net Income
On a GAAP basis, net income for the quarter was $33.6 million or 21 cents per share against net loss of $473.4 million or loss of $3.29 per share in the year-ago quarter. The year-over-year improvement was primarily backed by top-line growth and lower provision for income tax. Non-GAAP net income came in at $52.8 million or 33 cents per share compared with $21.9 million or 15 cents per share in the prior-year quarter.
Revenues
Quarterly total revenues increased 20.5% year over year to $778.5 million, primarily due to higher product sales. Ciena had three 10% customers in the quarter, of which one was a webscale customer. Notably, orders in the quarter were more than revenues, leading to rise in the company’s backlog. Ciena’s webscale business accounted for 22% of total revenues, reflecting an increase of 64% year over year. It expects this key customer segment to remain a growth driver in the quarters ahead.
Geographically, revenues from North America were $485.5 million, up 20.5% year over year, driven by additional share gains across diverse customer base, including new wins and increasing traction of packet and software portfolios. Revenues from Europe, Middle East and Africa were $129.2 million, up 32.1% due to new market share capture opportunities. Caribbean and Latin America totaled $30.9 million, down 10.7%. Asia Pacific revenues were $132.9 million, up 19.9% including a significant contribution from Japan.
Segmental Performance
Revenues from Networking Platforms increased 25.1% year over year to $620.5 million. Software and Software-Related Services revenues were $56.6 million compared with $53.5 million in the prior-year quarter. Revenues from Global Services were $101.4 million compared with $96.6 million a year ago.
Other Quarterly Details
Gross margin was 41.5% compared with 42.1% in the year-ago quarter. Operating expenses were $275.4 million, up from $255 million. Operating margin was 6.2% compared with 2.6% in the prior-year quarter. EBITDA was $78.4 million, up from $43.5 million.
Share Repurchases
During the reported quarter, Ciena repurchased nearly 0.6 million shares for an aggregate amount of $21.2 million. It aims to buy back around $150 million worth of shares by the end of fiscal 2019.
Cash Flow and Liquidity
During the fiscal first quarter, Ciena utilized $14.1 million of cash from operating activities against a cash generation of $35.7 million a year ago. As of Jan 31, 2019, the company had $668.8 million in cash and equivalents with $684.9 million of net long-term debt.
Fiscal Q2 Outlook
On the back of solid industry position and positive dynamics to gain additional market share, Ciena has provided guidance for the fiscal second quarter. The company expects revenues to be between $800 million and $830 million. While adjusted gross margin is anticipated to be 42-43%, adjusted operating expenses are projected to be $255-$260 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted 9.71% due to these changes.
VGM Scores
Currently, Ciena has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Ciena has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.
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Ciena (CIEN) Down 4.6% Since Last Earnings Report: Can It Rebound?
A month has gone by since the last earnings report for Ciena (CIEN - Free Report) . Shares have lost about 4.6% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Ciena due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Ciena Swings to Earnings in Q1 on Higher Revenues
Ciena reported healthy first-quarter fiscal 2019 (ended Jan 31, 2019) financial results wherein both the top line and bottom line improved year over year. This was driven by solid execution of operational strategies, including diversifying business and leveraging global scale.
Net Income
On a GAAP basis, net income for the quarter was $33.6 million or 21 cents per share against net loss of $473.4 million or loss of $3.29 per share in the year-ago quarter. The year-over-year improvement was primarily backed by top-line growth and lower provision for income tax. Non-GAAP net income came in at $52.8 million or 33 cents per share compared with $21.9 million or 15 cents per share in the prior-year quarter.
Revenues
Quarterly total revenues increased 20.5% year over year to $778.5 million, primarily due to higher product sales. Ciena had three 10% customers in the quarter, of which one was a webscale customer. Notably, orders in the quarter were more than revenues, leading to rise in the company’s backlog. Ciena’s webscale business accounted for 22% of total revenues, reflecting an increase of 64% year over year. It expects this key customer segment to remain a growth driver in the quarters ahead.
Geographically, revenues from North America were $485.5 million, up 20.5% year over year, driven by additional share gains across diverse customer base, including new wins and increasing traction of packet and software portfolios. Revenues from Europe, Middle East and Africa were $129.2 million, up 32.1% due to new market share capture opportunities. Caribbean and Latin America totaled $30.9 million, down 10.7%. Asia Pacific revenues were $132.9 million, up 19.9% including a significant contribution from Japan.
Segmental Performance
Revenues from Networking Platforms increased 25.1% year over year to $620.5 million. Software and Software-Related Services revenues were $56.6 million compared with $53.5 million in the prior-year quarter. Revenues from Global Services were $101.4 million compared with $96.6 million a year ago.
Other Quarterly Details
Gross margin was 41.5% compared with 42.1% in the year-ago quarter. Operating expenses were $275.4 million, up from $255 million. Operating margin was 6.2% compared with 2.6% in the prior-year quarter. EBITDA was $78.4 million, up from $43.5 million.
Share Repurchases
During the reported quarter, Ciena repurchased nearly 0.6 million shares for an aggregate amount of $21.2 million. It aims to buy back around $150 million worth of shares by the end of fiscal 2019.
Cash Flow and Liquidity
During the fiscal first quarter, Ciena utilized $14.1 million of cash from operating activities against a cash generation of $35.7 million a year ago. As of Jan 31, 2019, the company had $668.8 million in cash and equivalents with $684.9 million of net long-term debt.
Fiscal Q2 Outlook
On the back of solid industry position and positive dynamics to gain additional market share, Ciena has provided guidance for the fiscal second quarter. The company expects revenues to be between $800 million and $830 million. While adjusted gross margin is anticipated to be 42-43%, adjusted operating expenses are projected to be $255-$260 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted 9.71% due to these changes.
VGM Scores
Currently, Ciena has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Ciena has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.