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Ciena (CIEN) Beats on Q3 Earnings, Stock Falls on Waning Orders

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Ciena Corporation (CIEN - Free Report) reported decent third-quarter fiscal 2020 results (ended Aug 1, 2020), with the top and the bottom line beating the respective Zacks Consensus Estimate.

But, shares tumbled as the Hanover, MD-headquartered networking systems and software company stated that orders slowdown due to the COVID-19 pandemic is likely to hurt revenues for a few quarters.

Net Income

On a GAAP basis, net income in the quarter was $142.3 million or 91 cents per share compared with $86.7 million or 55 cents per share in the year-ago quarter. The improvement resulted from higher operating income.

Adjusted net income came in at $166.4 million or $1.06 per share compared with $112.3 million or 71 cents per share in the prior-year quarter. The bottom line beat the Zacks Consensus Estimate by 23 cents.

Ciena Corporation Price, Consensus and EPS Surprise Ciena Corporation Price, Consensus and EPS Surprise

Ciena Corporation price-consensus-eps-surprise-chart | Ciena Corporation Quote

Revenues

Quarterly total revenues inched up 1.7% year over year to $976.7 million, reflecting the impact of orders slowdown caused by the pandemic. Ciena had one 10%-plus customer in the quarter, which represented 12% of revenues. The top line surpassed the consensus estimate of $972 million.

Region-wise, revenues in the Americas were $713.3 million, up 8.7% year over year. Revenues in Europe, the Middle East and Africa were $162.5 million, down from $169.5 million in the year-ago quarter. Asia-Pacific revenues totaled $100.9 million, down 25.1% year over year.

Segment Results

Total revenues in the Networking Platforms increased 0.8% year over year to $802.3 million. Platform Software and Services revenues were $46.4 million compared with $37.3 million in the prior-year quarter. Blue Planet Automation Software and Services revenues increased from $10.5 million to $11.3 million. Total revenues in Global Services were $116.7 million, flat year over year.

Other Details

The adjusted gross margin was 48.2% compared with 44.7% in the year-ago quarter. Adjusted operating expenses were $251.2 million, down from $273.2 million. Operating income improved to $188 million from $125.3 million. Adjusted operating income increased to $219.3 million from $156 million. The adjusted operating margin came in at 22.4% compared with 16.2% in the prior-year quarter. Adjusted EBITDA was $241.1 million, up from $178 million in the year-ago quarter.

Cash Flow & Liquidity

In the first nine months of fiscal 2020, Ciena generated $306.4 million of net cash from operating activities compared with $173.1 million in the prior-year period. As of Aug 1, the company had $1,093.7 million in cash and equivalents with $677.9 million of net long-term debt.

Zacks Rank & Stocks to Consider

Ciena carries a Zacks Rank #3 (Hold), at present.

Some better-ranked stocks in the broader industry are Turtle Beach Corporation (HEAR - Free Report) , Vocera Communications, Inc. (VCRA - Free Report) and Acacia Communications, Inc. (ACIA - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Turtle Beach has a trailing four-quarter earnings surprise of 41%, on average.

Vocera has a trailing four-quarter earnings surprise of 70%, on average. The company’s earnings beat the Zacks Consensus Estimate in three of the last four quarters.

Acacia has a trailing four-quarter earnings surprise of 17%, on average. The company’s earnings topped the consensus estimate in three of the last four quarters.

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