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Is a Beat in the Cards for Lumentum (LITE) in Q4 Earnings?

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Lumentum Holdings (LITE - Free Report) is slated to report fourth-quarter fiscal 2020 results on Aug 11.

The company expects non-GAAP earnings in the range of 70-90 cents per share. The Zacks Consensus Estimate for fiscal fourth-quarter earnings per share has remained stable over the past 30 days at 83 cents per share. The figure suggests a decline of 9.8% from the prior-year quarter.

Lumentum projects fiscal second-quarter revenues between $325 million and $365 million.

The consensus mark for revenues is pegged at $349.9 million, indicating a decline of 13.5% from the year-ago reported figure.

Notably, the company has a trailing four-quarter earnings surprise of 20.65%, on average.

Lumentum Holdings Inc. Price and EPS Surprise

Lumentum Holdings Inc. Price and EPS Surprise

Lumentum Holdings Inc. price-eps-surprise | Lumentum Holdings Inc. Quote

Factors to Note

For fourth-quarter fiscal 2020, Lumentum expects Telecom and Datacom revenues to remain flat sequentially, as COVID-19 induced supply chain constraints, limit growth despite higher Datacom chip sales on the back of strong data center and 5G demand. Notably, the corresponding figure in the fiscal third quarter was $251 million. The Zacks Consensus Estimate for the fiscal fourth-quarter Telecom and Datacom revenues is pegged at $218 million.

Incremental adoption of Lumentum’s Datacom chips is expected to have benefited the fiscal fourth-quarter performance. Moreover, continued demand in global network bandwidth requirements and for building infrastructure related to 5G are likely to have acted as key tailwinds in this regard.

Further, continued momentum in demand for the company’s ROADMs and high-powered routers, amid coronavirus crisis led work-from-home wave, might get reflected in the to-be-reported quarter’s results.

Notably, the Zacks Consensus Estimate for the fiscal fourth-quarter Optical Communications revenues is pegged at $312 million. The corresponding figure in the fiscal third quarter was $359.3 million.

Consumer and Industrial revenues are anticipated to be down sequentially. Demand for 3D sensing is anticipated to decline more than 40%, which remains a major concern. Notably, the corresponding figure in the fiscal third quarter came in at $108.3 million. The Zacks Consensus Estimate for the fiscal fourth-quarter Consumer and Industrial revenues stands at $67 million.

Revenues from Commercial Lasers are also projected to decline on a quarter-over-quarter basis by 20%, on coronavirus crisis led global slowdown in industrial production. Notably, the corresponding figure in the fiscal third quarter came in at $43.5 million. The Zacks Consensus Estimate for Commercial Lasers revenues is pegged at $34.8 million for the fiscal fourth quarter.

However, increasing expenditure on product development with an aim to add innovative capabilities to 3D sensing offerings amid competition from Himax (HIMX - Free Report) may have impacted the fiscal fourth-quarter profitability.

Also, the challenges pertaining to smartphone supply chain are likely to have affected top-line performance in the quarter to be reported.

Nevertheless, ramping up production in Malaysia on easing of lockdowns is likely to have aided fiscal fourth-quarter performance.

What the Zacks Model Unveils

Our proven model predicts an earnings beat for Lumentum this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat.

Lumentum has an Earnings ESP of +8.27% and a Zacks Rank #3. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Other Stocks that Warrant a Look

Here are a couple of other companies, which also have the right combination of elements to post an earnings beat this quarter:

Deere & Company (DE - Free Report) has an Earnings ESP of +4.64% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Agilent Technologies, Inc. (A - Free Report) has an Earnings ESP of +5.00% and a Zacks Rank #2.

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