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Ciena (CIEN) Q3 Earnings Beat on Estimates, Revenues Miss
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Ciena Corp. (CIEN - Free Report) reported third-quarter fiscal 2016 results. While adjusted earnings of 35 cents per share surpassed the Zacks Consensus Estimate of 31 cents, revenues of $670.6 missed our expectation of $674.3 million.
However, on a year-over-year basis, the metrics registered growth of 20.7% and 11.2%, respectively. Ciena credited sturdy sales growth in North America and direct sales to web-scale providers as the major catalysts. Direct sales to web-scale providers has the “best ever quarter” with over 12% of total revenues. Shares were up 8% yesterday.
Quarterly Details
Ciena’s non-GAAP earnings came in at 42 cents as against 37 cents reported in the prior-year quarter.
Product revenues (82.5% of revenues) were up 12.1% year over year to $553.5 million. Services revenues (17.5% of revenues) increased 7.4% year over year to $117.1 million.
Networking platforms (80.6% of total revenue) rose 12.1% year over year to $540.9 million. Revenues from Software and software-related services (4.7% of total revenue) jumped 19.2% year over year to $31.6 million. Global services revenues (14.7% of total revenue) grew 4.7% from the year-ago fiscal quarter to $98.1 million.
United States contributed 61.1% to revenues in the fiscal quarter, while international customers contributed the rest. One customer accounted for about 10% of revenues.
Ciena’s sales went up 12.4% in North America and 11.9% in Europe, Middle East and Africa (EMEA) and 48.5% in Asia Pacific. However, sales in Caribbean and Latin America plummeted 28.4%.
Ciena reported non-GAAP gross margin of 46.8%, which expanded 150 basis points (bps) year over year. Non-GAAP operating margin expanded 170 bps from the year-ago fiscal quarter to 13.5%.
Balance Sheet
At the end of fiscal third quarter, cash and cash equivalents (including short-term and long-term investments) were $1.27 billion and long-term debt was approximately $1 billion.
Ciena generated solid cash flow of $152.8 million in the first nine months of the fiscal compared with approximately $177.5 million generated in the first nine months of the fiscal 2015.
Guidance
Ciena also provided its guidance for the fiscal fourth quarter. Revenues for the fiscal fourth quarter are forecast in the range of $700–$730 million. Non-GAAP gross margin is projected in around mid-40%. Non-GAAP operating expense was projected at approximately $230 to $235 million.
Our Take
Ciena’s revenues are expected to benefit from growing demand for packet-optical transport and switching products, integrated network and service management software. Also, Ciena remains positive about its North America business. Ciena anticipates overall global market to improve in mid-single digits with the sole exception of China. Moreover, Verizon project remains a long-term growth driver along with higher number of orders from international customers, its Tier 1 contract wins and robust backlog. Ciena’s focus on cost-cutting initiatives is also expected to boost its bottom line.
Nonetheless, Ciena’s highly leveraged balance sheet may affect its profitability. The company is also likely to be affected by global macroeconomic uncertainty and intense competition from Cisco (CSCO - Free Report) , Juniper Networks (JNPR - Free Report) and others .
Ciena carries a Zacks Rank #3 (Hold). A better-ranked stock in the same space is Oclaro, Inc. ,sporting a Zacks Rank #1 (Strong Buy).
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Ciena (CIEN) Q3 Earnings Beat on Estimates, Revenues Miss
Ciena Corp. (CIEN - Free Report) reported third-quarter fiscal 2016 results. While adjusted earnings of 35 cents per share surpassed the Zacks Consensus Estimate of 31 cents, revenues of $670.6 missed our expectation of $674.3 million.
However, on a year-over-year basis, the metrics registered growth of 20.7% and 11.2%, respectively. Ciena credited sturdy sales growth in North America and direct sales to web-scale providers as the major catalysts. Direct sales to web-scale providers has the “best ever quarter” with over 12% of total revenues. Shares were up 8% yesterday.
Quarterly Details
Ciena’s non-GAAP earnings came in at 42 cents as against 37 cents reported in the prior-year quarter.
CIENA CORP Price, Consensus and EPS Surprise
CIENA CORP Price, Consensus and EPS Surprise | CIENA CORP Quote
Product revenues (82.5% of revenues) were up 12.1% year over year to $553.5 million. Services revenues (17.5% of revenues) increased 7.4% year over year to $117.1 million.
Networking platforms (80.6% of total revenue) rose 12.1% year over year to $540.9 million. Revenues from Software and software-related services (4.7% of total revenue) jumped 19.2% year over year to $31.6 million. Global services revenues (14.7% of total revenue) grew 4.7% from the year-ago fiscal quarter to $98.1 million.
United States contributed 61.1% to revenues in the fiscal quarter, while international customers contributed the rest. One customer accounted for about 10% of revenues.
Ciena’s sales went up 12.4% in North America and 11.9% in Europe, Middle East and Africa (EMEA) and 48.5% in Asia Pacific. However, sales in Caribbean and Latin America plummeted 28.4%.
Ciena reported non-GAAP gross margin of 46.8%, which expanded 150 basis points (bps) year over year. Non-GAAP operating margin expanded 170 bps from the year-ago fiscal quarter to 13.5%.
Balance Sheet
At the end of fiscal third quarter, cash and cash equivalents (including short-term and long-term investments) were $1.27 billion and long-term debt was approximately $1 billion.
Ciena generated solid cash flow of $152.8 million in the first nine months of the fiscal compared with approximately $177.5 million generated in the first nine months of the fiscal 2015.
Guidance
Ciena also provided its guidance for the fiscal fourth quarter. Revenues for the fiscal fourth quarter are forecast in the range of $700–$730 million. Non-GAAP gross margin is projected in around mid-40%. Non-GAAP operating expense was projected at approximately $230 to $235 million.
Our Take
Ciena’s revenues are expected to benefit from growing demand for packet-optical transport and switching products, integrated network and service management software. Also, Ciena remains positive about its North America business. Ciena anticipates overall global market to improve in mid-single digits with the sole exception of China. Moreover, Verizon project remains a long-term growth driver along with higher number of orders from international customers, its Tier 1 contract wins and robust backlog. Ciena’s focus on cost-cutting initiatives is also expected to boost its bottom line.
Nonetheless, Ciena’s highly leveraged balance sheet may affect its profitability. The company is also likely to be affected by global macroeconomic uncertainty and intense competition from Cisco (CSCO - Free Report) , Juniper Networks (JNPR - Free Report) and others .
Ciena carries a Zacks Rank #3 (Hold). A better-ranked stock in the same space is Oclaro, Inc. ,sporting a Zacks Rank #1 (Strong Buy).
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>