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Will Lower Revenues Dampen Ciena's (CIEN) Earnings in Q4?

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Ciena Corporation (CIEN - Free Report) is scheduled to report fourth-quarter fiscal 2020 results (ended Oct 31, 2020) on Dec 10, before the opening bell. In the last reported quarter, the company delivered a positive earnings surprise of 27.7%. The bottom line beat the Zacks Consensus Estimate by 23 cents.

The Hanover, MD-based networking systems and software company is expected to have recorded lower revenues year over year due to a challenging macro environment. The decline in revenues can be attributed to COVID-19-related market dynamics that have slowed down orders. Nevertheless, Ciena continued to execute on its strategy and expand its market leadership.

Let’s discuss the factors that are likely to get reflected in the upcoming quarterly announcement.

Factors at Play

During the quarter under review, Windstream — a leading provider of advanced network communications — selected Ciena to build its National Converged Optical Network with the latter’s photonic, coherent optical and intelligent software platforms. NEXTDC Limited, Australia’s leading Data Center-as-a-Service provider, opted for Ciena’s Data Center Interconnect platform to improve network scalability.

Infonas, a leading global telecommunications service and cloud provider in the Middle East, selected software and services from Ciena to expand its network capabilities and meet the increasing demand for high-performance connectivity. Telefonica Deutschland, a leading integrated telecommunications provider, chose software from Blue Planet, a division of Ciena, to support the preparation of its network in Germany to adapt to escalating data traffic and bandwidth demands from users.

Also, DISH Network chose inventory and service order management software from Blue Planet to automate its 5G wireless network. Converge ICT Solutions, the Philippines’ fast-growing local fiber Internet provider, deployed Ciena’s 400G WaveLogic Ai coherent optical solution to improve connectivity for its growing customer base of global content network providers, enterprises and consumers.

Such developments are likely to have had a positive impact on Ciena’s top line to a moderate extent. For the fiscal fourth quarter, the Zacks Consensus Estimate for total revenues is pegged at $829 million, indicating a decline of 14.4% from the year-ago quarter’s reported figure.

Adjusted earnings per share are pegged at 63 cents, which suggests growth of 8.6% from the prior-year quarter’s recorded figure. The bottom line is likely to have benefited from lower operating expenses.

What Our Model Says

Our proven model doesn’t conclusively predict an earnings beat for Ciena 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. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: Ciena’s Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is +7.18% as the former is pegged at 68 cents and the latter at 63 cents.

Ciena Corporation Price and EPS Surprise

Ciena Corporation Price and EPS Surprise

Ciena Corporation price-eps-surprise | Ciena Corporation Quote

Zacks Rank: Ciena currently has a Zacks Rank #4 (Sell).

Stocks to Consider

Here are some companies that you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter.

Construction Partners, Inc. (ROAD - Free Report) is slated to release fourth-quarter fiscal 2020 results on Dec 11. It has an Earnings ESP of +16.02% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

American Outdoor Brands, Inc. (AOUT - Free Report) has an Earnings ESP of +4.00% and a Zacks Rank of 3. The company is set to report second-quarter fiscal 2021 results on Dec 15.

Winnebago Industries, Inc. (WGO - Free Report) is scheduled to release first-quarter fiscal 2021 results on Dec 18. The company has an Earnings ESP of +14.89% and a Zacks Rank #1.

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