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Viavi (VIAV) Beats Q3 Earnings Estimates on Solid Revenues

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Viavi Solutions Inc. (VIAV - Free Report) reported impressive third-quarter fiscal 2021 (ended Apr 3, 2021) results, with both the bottom and top lines surpassing their respective Zacks Consensus Estimate. The San Jose, CA-based company generated higher revenues on the back of solid demand for wireless, fiber and anti-counterfeiting products.

Bottom Line

On a GAAP basis, net income in the quarter was $11.8 million or 5 cents per share against net loss of $32.8 million or loss of 14 cents per share in the year-ago quarter. The year-over-year improvement was primarily attributable to higher income from operations.

Non-GAAP net income came in at $42.3 million or 18 cents per share compared with $32 million or 14 cents per share in the prior-year quarter. The bottom line beat the Zacks Consensus Estimate by a penny.

Viavi Solutions Inc. Price, Consensus and EPS Surprise

Viavi Solutions Inc. Price, Consensus and EPS Surprise

Revenues

Recovering from the pandemic adversities, quarterly total net revenues increased 18.4% year over year to $303.4 million and exceeded the company’s guidance of $280-$300 million. The upsurge was primarily driven by continued strength in wireless and fiber, along with robust demand for anti-counterfeiting products. Also, the top line surpassed the consensus estimate of $291 million.

Segment wise, revenues from NE (Network Enablement) were up 16.5% from the year-ago quarter’s figure to $190.9 million due to increased demand for fiber, cable and wireless products. SE (Service Enablement) revenues fell 12.1% to $20.3 million, mainly due to softness in demand for assurance and data center products. Overall, revenues in the NSE (Network and Service Enablement) segment were above the guidance of $189-$205 million.

NSE’s gross margin was 64.2%, down 10 basis points (bps) year over year. Operating margin of 9.9% increased 250 bps, primarily as a result of higher revenues.

OSP (Optical Security and Performance Products) revenues increased 33.2% year over year to $92.2 million and came within the projected range of $91-$95 million. The improvement was mainly driven by robust demand for anti-counterfeiting and 3D sensing products.

OSP’s gross margin of 60.6% expanded 800 bps year over year owing to higher volume, favorable product mix and high factory utilization. Operating margin of 43.9% improved 890 bps on higher gross margin.

Region wise, Viavi generated 33.6% of total net revenues from the Americas, 33.7% from the Asia-Pacific and 32.7% from EMEA (Europe, Middle East and Africa).

Other Details

Overall, non-GAAP gross profit was $191.4 million with a margin of 63.1% compared with $156.7 million with a margin of 61.2% in the year-ago quarter. Non-GAAP operating income was $61.4 million compared with $38 million in the prior-year quarter with respective margins of 20.2% and 14.8%.

Cash Flow & Liquidity

During the fiscal third quarter, Viavi generated $48.1 million of cash from operations compared with $39.1 million in the year-earlier period. As of Apr 3, 2021, the company had $672.2 million in cash and cash equivalents with $618.1 million of long-term debt.

Q4 Fiscal 2021 Guidance

For the fourth quarter of fiscal 2021 (ending Jul 3, 2021), Viavi expects revenues in the range of $290-$310 million. These include NSE revenue expectations in the range of $219 million to $235 million and OSP revenues in the range of $71 million to $75 million. Non-GAAP earnings are estimated in the band of 18-20 cents per share.

Zacks Rank & Stocks to Consider

Viavi currently has a Zacks Rank #3 (Hold).  

A few better-ranked stocks in the broader industry are Altice USA, Inc. (ATUS - Free Report) , Cogent Communications Holdings, Inc. (CCOI - Free Report) and Corning Incorporated (GLW - Free Report) . While Altice USA and Cogent sport a Zacks Rank #1 (Strong Buy), Corning carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.   

Altice USA pulled off a trailing four-quarter earnings surprise of 61.5%, on average.

Cogent pulled off a trailing four-quarter earnings surprise of 29%, on average.

Corning pulled off a trailing four-quarter earnings surprise of 39%, on average.

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