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Lumentum (LITE) Surges 8.5%: Is This an Indication of Further Gains?

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Lumentum (LITE - Free Report) shares ended the last trading session 8.5% higher at $85.74. The jump came on an impressive volume with a higher-than-average number of shares changing hands in the session. This compares to the stock's 15.5% loss over the past four weeks.

Lumentum Holdings extended its rally, as investors cheered the termination of the amended definitive merger proposal (entered on Mar 9, 2021) that it has received from Coherent (COHR - Free Report) .

On Mar 23, 2021, Lumentum confirmed that on Mar 22, 2021, it provided to Coherent’s board of directors a revised bid to acquire Coherent in a cash and stock transaction. According to the terms of the revised proposal, Coherent shareholders would receive $230.00 per share in cash and 0.6724 shares of Lumentum common stock for each Coherent share they hold.

Nevertheless, after evaluation of risks and benefits, Coherent's board of directors decided to call off Lumentum merger offer and accept II-VI Incorporated (IIVI - Free Report) acquisition offer. Under the terms of Coherent's merger agreement with II-VI, each share of Coherent common stock will be traded for $220.00 in cash and 0.91 of a share of II-VI common stock at the conclusion of the deal.

In compliance with the terms of the definitive merger deal with II-VI, Coherent is obliged to pay a $217.6 million termination fee to Lumentum.

Price and Consensus

Price Consensus Chart for LITE

This optical networking products maker is expected to post quarterly earnings of $1.41 per share in its upcoming report, which represents a year-over-year change of +11.9%. Revenues are expected to be $435.1 million, up 8% from the year-ago quarter.

Earnings and revenue growth expectations certainly give a good sense of the potential strength in a stock, but empirical research shows that trends in earnings estimate revisions are strongly correlated with near-term stock price movements.

For Lumentum, the consensus EPS estimate for the quarter has remained unchanged over the last 30 days. And a stock's price usually doesn't keep moving higher in the absence of any trend in earnings estimate revisions. So, make sure to keep an eye on LITE going forward to see if this recent jump can turn into more strength down the road.

The stock currently carries a Zacks Rank 3 (Hold). You can see the complete list of today's Zacks Rank #1 (Strong Buy) stocks here >>>>

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