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Following the third quarter earnings announcement on May 3, none of the analysts covering JDS Uniphase Corp. (JDSU - Analyst Report) have revised their estimates. The brokers have retained their estimates based on the belief that the volatile macroeconomic conditions, delays in carrier spending and other negative news has already been reflected in the current valuation.

First Quarter Highlights

On a GAAP basis, quarterly net loss was $17.4 million or 8 cents per share, compared with a net income of $38.6 million or 16 cents per share in the year-ago quarter. Adjusted EPS of 5 cents missed the Zacks Consensus Estimate of 7 cents.

Quarterly net revenue of $409.2 million was down 10.1% year over year, well below the Zacks Consensus Estimate of $420 million. Operating loss was $7.6 million compared with an operating income of $12.6 million in the prior-year quarter.

Agreement of Analysts

Of the two analysts covering the stock in the last 7 days, none of the analysts have revised the estimates upward or downward for the fourth quarter of 2012. Similarly, for the first quarter of 2013, out of the two analysts covering the stock, none have revised their estimates.

Similarly, for fiscal 2012 and 2013, out of the two analysts covering the stock in the last 7 days, none have revised their estimates.

Currently, the Zacks Consensus Estimate for the fourth quarter of fiscal 2012 is 9 cents, with a projected annual decline of 43.75%. For the first quarter of fiscal 2013, the Zacks Consensus Estimate of 14 cents indicates an annual growth of 35.00%.

Magnitude of Estimate Revisions

During the past 7 days, the current Zacks Consensus Estimate for the fourth quarter of 2012 and the first quarter of 2013 has been in line with the previous estimates of 9 and 14 cents respectively. Similarly, for fiscal 2012 and 2013, the current Zacks Consensus Estimate remains in line with the previous estimates of 38 and 77 cents, respectively.        

Earnings Surprises

The company has fallen short of the Zacks Consensus Estimates in two out of the four previous quarters. In the first quarter of 2012, the company’s reported earnings were in line with the Zacks Consensus Estimate, while it fell short by 2 cents or 28.57% in the third quarter of 2012.

The estimates for the fourth quarter of 2012 and the first quarter of 2013 are in line with the Zacks Consensus Estimates. Similarly, fiscal 2012 and 2013 estimates are in line with the Zacks Consensus Estimate.

Our Recommendation

Going forward, we believe that as a supplier of fiber optic components for high speed communication network, JDS Uniphase will benefit owing to the increased broadband penetration and rapidly growing internet subscriber.

Diversification in non-telecom areas like commercial laser, currency pigments, 3-D cinema and more will act as a growth catalyst for the company. Additionally, the acquisition of Agilent Technology Inc’s (A - Analyst Report) Network Solution Division has increased its market size considerably.

However, we remain concerned about the slowness of the U.S. economic growth and a slow carrier spending situation in Europe and U.S. which might act as impediments to the future growth of the company. Recently, the optical gear manufacturing is going through a consolidation phase which we believe might create headwinds for JDS Uniphase.

Moreover, the company faces stiff competition from Finisar corp. (FNSR - Snapshot Report), Oplink Communications Inc. (OPLK - Snapshot Report) and Oclaro Inc. (OCLR - Snapshot Report), which might jeopardize its growth.    

Considering these factors, we maintain our long-term Neutral recommendation on JDS Uniphase. Currently, JDS Uniphase has a Zacks #4 Rank, implying a short-term Sell rating on the stock.

About Earnings Estimate Scorecard

As a PhD from MIT, Len Zacks proved over 30 years ago that earnings estimate revisions are the most powerful force impacting stock prices. He turned this ground breaking discovery into two of the most celebrating stock rating systems in use today. The Zacks Rank for stock trading in a 1 to 3 month time horizon and the Zacks Recommendation for long-term investing (6+ months). These “Earnings Estimate Scorecard” articles help analyze the important aspects of estimate revisions for each stock after their quarterly earnings announcements. Learn more about earnings estimates and our proven stock ratings at: http://www.zacks.com/education/

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