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Viav Solutions (VIAV) Up 9.2% Since Last Earnings Report: Can It Continue?
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A month has gone by since the last earnings report for Viav Solutions (VIAV - Free Report) . Shares have added about 9.2% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Viav Solutions due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Viavi's Q3 Earnings Miss Estimates, Revenues Fall Y/Y
Viavi reported mixed third-quarter fiscal 2023 results, with the top line beating the consensus estimate and the bottom line missing the same. Soft demand trends, lower service provider and network equipment manufacturing spending and macroeconomic headwinds led to the top-line contraction year over year.
Net Income
On a GAAP basis, Viavi incurred a net loss of $15.4 million or a loss 7 cents per share against a net income of $19.2 million or 8 cents per share in the year-ago quarter. The decline was primarily driven by year-over-year lower net sales.
Non-GAAP net income was $18 million or 8 cents per share compared with $52 million or 22 cents per share in the prior-year quarter. The bottom line fell short of the Zacks Consensus Estimate by a penny.
Revenues
Net sales in the quarter were $247.8 million, down 21.5% year over year owing to sluggish demand trends and macroeconomic challenges in the Network and Service Enablement (NSE) business. Declining sales in Optical Security and Performance Products (OSP) also hurt the top line. The top line beat the Zacks Consensus Estimate of $247 million.
The Network and Service Enablement (NSE) segment generated $177.3 million during the quarter. The figure lagged management’s guidance levels, reflecting low demand for lab products. Revenues from Network Enablement (NE) were down 26.8% from the year-ago quarter’s levels to $149.6 million, due to weak demand stemming from constrained spending environment. Net sales from Service Enablement (SE) stood at $27.7 million, up 4.5% year over year owing to healthy demand for Assurance products.
Optical Security and Performance Products (OSP) registered revenues of $70.5 million, down 16.8% year over year owing to declining sales of Anti-Counterfeiting and 3D sensing products. However, the figure surpassed the midpoint of the company’s initial guidance.
Revenues from America (40.5% of total revenues during third-quarter fiscal 2023) stood at $100.5 million, down from $108.8 million. Revenues from Asia-Pacific (30.5%) were $75.5 million, down 34.1% year over year. Revenues from EMEA (29%) stood at $71.8 million, down from $92.2 million in the year-ago quarter.
Other Details
In the third quarter, non-GAAP gross margin stood at 59.7%, down from 62% from the year-ago quarters’ levels. Non-GAAP operating margin declined to 11.4% from 21.5% reported in the prior-year quarter.
Operating margin in the NSE business was 1.4%, lower than the company’s initial guidance. Non-GAAP gross margin from the NE segment declined to 62% from 63.8% in the year-ago quarter owing to decline in volumes. Owing to a favorable product mix and increased volume, non-GAAP gross margin in the SE segment rose to 70.4% from 69.1% reported in the year-ago quarter. OSP business witnessed 490 bps (basis points) contraction on a year-over-over basis in non-GAAP gross margin to 50.6% due to startup costs in the company’s new Arizona facility.
Cash Flow & Liquidity
During the March quarter, Viavi generated $17.8 million of cash from operating activities compared with $28.9 million in the prior-year period. As of March 31, 2023, the company had $580.6 million in cash and cash equivalents with $627.9 million of long-term debt.
Outlook
For fourth quarter fiscal 2023, management expects revenues in the range of $242-$262 million. Non-GAAP operating margin is projected within the range of 10-12.4% with non-GAAP EPS in the range of 7 to 9 cents.
For the Network and Service Enablement segment, revenues are estimated at $187 million (+/- 8 million) with a non-GAAP operating margin of 3-6%. Revenues for the Optical Security and Performance Products (OSP) segment is approximated at $65 (+/- $2 million). Non-GAAP tax expenses are estimated at 25% and non-GAAP other income/expenses is expected at $4.5 million. Share count is estimated at nearly 222 million shares.
Management expects marginal decline in the OSP segment sequentially owing to low demand of anti-counterfeiting products and post-COVID fiscal tightening. The 3D sensing business will likely witness somewhat weaker sales owing to lower demand for smartphones and supply chain transition. In the NSE segment, management expects a gradual recovery in the second half of 2023.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month.
The consensus estimate has shifted -36% due to these changes.
VGM Scores
At this time, Viav Solutions has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Viav Solutions has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
Performance of an Industry Player
Viav Solutions is part of the Zacks Communication - Components industry. Over the past month, Arista Networks (ANET - Free Report) , a stock from the same industry, has gained 25.3%. The company reported its results for the quarter ended March 2023 more than a month ago.
Arista Networks reported revenues of $1.35 billion in the last reported quarter, representing a year-over-year change of +54.1%. EPS of $1.43 for the same period compares with $0.84 a year ago.
For the current quarter, Arista Networks is expected to post earnings of $1.44 per share, indicating a change of +33.3% from the year-ago quarter. The Zacks Consensus Estimate has changed +1% over the last 30 days.
Arista Networks has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of B.
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Viav Solutions (VIAV) Up 9.2% Since Last Earnings Report: Can It Continue?
A month has gone by since the last earnings report for Viav Solutions (VIAV - Free Report) . Shares have added about 9.2% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Viav Solutions due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Viavi's Q3 Earnings Miss Estimates, Revenues Fall Y/Y
Viavi reported mixed third-quarter fiscal 2023 results, with the top line beating the consensus estimate and the bottom line missing the same. Soft demand trends, lower service provider and network equipment manufacturing spending and macroeconomic headwinds led to the top-line contraction year over year.
Net Income
On a GAAP basis, Viavi incurred a net loss of $15.4 million or a loss 7 cents per share against a net income of $19.2 million or 8 cents per share in the year-ago quarter. The decline was primarily driven by year-over-year lower net sales.
Non-GAAP net income was $18 million or 8 cents per share compared with $52 million or 22 cents per share in the prior-year quarter. The bottom line fell short of the Zacks Consensus Estimate by a penny.
Revenues
Net sales in the quarter were $247.8 million, down 21.5% year over year owing to sluggish demand trends and macroeconomic challenges in the Network and Service Enablement (NSE) business. Declining sales in Optical Security and Performance Products (OSP) also hurt the top line. The top line beat the Zacks Consensus Estimate of $247 million.
The Network and Service Enablement (NSE) segment generated $177.3 million during the quarter. The figure lagged management’s guidance levels, reflecting low demand for lab products. Revenues from Network Enablement (NE) were down 26.8% from the year-ago quarter’s levels to $149.6 million, due to weak demand stemming from constrained spending environment. Net sales from Service Enablement (SE) stood at $27.7 million, up 4.5% year over year owing to healthy demand for Assurance products.
Optical Security and Performance Products (OSP) registered revenues of $70.5 million, down 16.8% year over year owing to declining sales of Anti-Counterfeiting and 3D sensing products. However, the figure surpassed the midpoint of the company’s initial guidance.
Revenues from America (40.5% of total revenues during third-quarter fiscal 2023) stood at $100.5 million, down from $108.8 million. Revenues from Asia-Pacific (30.5%) were $75.5 million, down 34.1% year over year. Revenues from EMEA (29%) stood at $71.8 million, down from $92.2 million in the year-ago quarter.
Other Details
In the third quarter, non-GAAP gross margin stood at 59.7%, down from 62% from the year-ago quarters’ levels. Non-GAAP operating margin declined to 11.4% from 21.5% reported in the prior-year quarter.
Operating margin in the NSE business was 1.4%, lower than the company’s initial guidance. Non-GAAP gross margin from the NE segment declined to 62% from 63.8% in the year-ago quarter owing to decline in volumes. Owing to a favorable product mix and increased volume, non-GAAP gross margin in the SE segment rose to 70.4% from 69.1% reported in the year-ago quarter. OSP business witnessed 490 bps (basis points) contraction on a year-over-over basis in non-GAAP gross margin to 50.6% due to startup costs in the company’s new Arizona facility.
Cash Flow & Liquidity
During the March quarter, Viavi generated $17.8 million of cash from operating activities compared with $28.9 million in the prior-year period. As of March 31, 2023, the company had $580.6 million in cash and cash equivalents with $627.9 million of long-term debt.
Outlook
For fourth quarter fiscal 2023, management expects revenues in the range of $242-$262 million. Non-GAAP operating margin is projected within the range of 10-12.4% with non-GAAP EPS in the range of 7 to 9 cents.
For the Network and Service Enablement segment, revenues are estimated at $187 million (+/- 8 million) with a non-GAAP operating margin of 3-6%. Revenues for the Optical Security and Performance Products (OSP) segment is approximated at $65 (+/- $2 million). Non-GAAP tax expenses are estimated at 25% and non-GAAP other income/expenses is expected at $4.5 million. Share count is estimated at nearly 222 million shares.
Management expects marginal decline in the OSP segment sequentially owing to low demand of anti-counterfeiting products and post-COVID fiscal tightening. The 3D sensing business will likely witness somewhat weaker sales owing to lower demand for smartphones and supply chain transition. In the NSE segment, management expects a gradual recovery in the second half of 2023.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month.
The consensus estimate has shifted -36% due to these changes.
VGM Scores
At this time, Viav Solutions has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Viav Solutions has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
Performance of an Industry Player
Viav Solutions is part of the Zacks Communication - Components industry. Over the past month, Arista Networks (ANET - Free Report) , a stock from the same industry, has gained 25.3%. The company reported its results for the quarter ended March 2023 more than a month ago.
Arista Networks reported revenues of $1.35 billion in the last reported quarter, representing a year-over-year change of +54.1%. EPS of $1.43 for the same period compares with $0.84 a year ago.
For the current quarter, Arista Networks is expected to post earnings of $1.44 per share, indicating a change of +33.3% from the year-ago quarter. The Zacks Consensus Estimate has changed +1% over the last 30 days.
Arista Networks has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of B.