It has been more than a month since the last earnings report for Ciena Corporation (CIEN - Free Report) . Shares have added about 2.1% in that time frame, underperforming the market.
Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted 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.
Ciena reported fiscal third-quarter 2017 non-GAAP earnings of $0.51, which increased 21.4% on a year-over-year basis and beat the Zacks Consensus Estimate of $0.49.
Revenues of $728.7 million increased 8.7% year over year and beat the consensus mark of $726.9 million.
Product revenues (83.8% of revenues) were up 10.3% year over year to $610.7 million. Services revenues (16.2% of revenues) increased 0.8% year over year to $118 million.
Segment-wise, networking platforms (81.3% of total revenue) grew 9.5% year over year to $592.3 million, benefiting from the addition of 14 new customers to its WaveServer platform.
Revenues from Software and software-related services (5.8% of total revenue) soared 33.9% year over year to $42.3 million, mainly driven by accelerated software deployments.
Global services revenues (12.9% of total revenue) declined 4.1% from the year-ago quarter to $94.1 million.
Region-wise, Ciena’s revenues grew 6.2% in North America, 10.9% in Caribbean and Latin America (CALA) and 41.6% in Asia Pacific (APAC) but fell 7.9% in Europe, Middle East and Africa (EMEA).
U.S. customers accounted for 60.1% of its revenues, of which 28% was contributed by two major customers namely AT&T and Verizon.
The company’s non-GAAP gross margin contracted 130 basis points (bps) year over year to 45.5%.
Ciena incurred non-GAAP operating expenses of $229.3 million, up 2.6% from the year-ago quarter. However, as a percentage of revenues, it decreased 180 bps from the year-ago quarter to 31.5%.
As a result, non-GAAP operating margin expanded 60 bps to 14.1%.
The company ended the quarter with cash and investments of $854.2 million.
Ciena generated operating cash flow of $50.6 million in the quarter compared with approximately $70 million in the year-ago quarter.
Ciena also provided guidance for fourth-quarter fiscal 2017. Revenues for the current quarter are forecast in the range of $720–$750 million. Non-GAAP gross margin is anticipated to be approximately in the mid-40% range. Non-GAAP operating expenses are projected to be around $240 million.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There have been three revisions lower for the current quarter. In the past month, the consensus estimate has shifted lower by 8.6% due to these changes.
At this time, Ciena's stock has a subpar Growth Score of D, a grade with the same score on the momentum front. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
The company's stock is suitable solely for value investors based on our style scores.
Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift. Notably, the stock has a Zacks Rank #3 (Hold). We expect in-line returns from the stock in the next few months.