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Telecommunications network specialist Ciena Corp. (CIEN - Analyst Report) is scheduled to release its fiscal fourth quarter 2012 earnings results before the opening bell on December 13, 2012. In the run-up to the earnings release, we do not notice any revision in analysts’ estimates.

Prior-Quarter Recap

Ciena’s top line increased 8.9% year over year in the third quarter primarily due to higher demand for the company’s products and services. However, the company reported a loss of 4 cents on non-GAAP basis, which worsened from the previous-year quarter’s loss of 8 cents.

Ciena expects fourth quarter 2012 revenues in the range of $455.0 million to $480.0 million. The Zacks Consensus Estimate projects Ciena to earn revenues of $469.0 million. Adjusted gross margin is projected to be at 40%, consistent with the company’s near-term expectation. Management expects adjusted operating expenses to be around low $180 million range.

For further details please read: Ciena Beats, Still Posts Loss

Estimate Revision Trend

In the last 30 days, none of the 6 analysts covering the stock revised estimates. Therefore, estimated loss per share was pinned at 14 cents.

Analysts covering the stock expect Ciena to report in-line results, while margins are projected to remain under pressure in the near term. Analysts expect Ciena to report better-than-expected FY13 due to Tier 1 operators such as Verizon (VZ - Analyst Report) and AT&T (T - Analyst Report) deploying Ciena’s 100G coherent transport and OTN switching platforms. On the contrary, analysts remain cautious about the competitive product pricing, margin contractions and weak demand in the European market.

Recommendation

Ciena has posted average earnings surprise of a negative 1.53% in the trailing four quarters. The company reported losses in the past two quarters, but they were narrower than the Zacks Consensus Estimate. Thus, we anticipate the company to recover on the back of favorable operational execution and the new product line up. Going forward, these factors would lead to a gradual improvement in results.

Moreover, we expect multi-year optical upgrades to act as a positive catalyst for the company over the long term. We believe that increasing spending on optical upgrades will help the company to counter sluggish macroeconomic conditions going forward.

However, we cannot undermine the near-term headwinds such as delays in revenue recognition due to new project ramp ups, increased expenses, slowdown in carrier spending and intensifying competition from its peers.

We have a long-term Outperform recommendation on Ciena. Currently, Ciena has a Zacks #3 Rank (Hold).

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