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Lumentum (LITE) to Report Q1 Earnings: What's in the Cards?

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Lumentum Holdings Inc. (LITE - Free Report) is set to report first-quarter fiscal 2019 results on Nov 1.

The company beat the Zacks Consensus Estimate in three of the trailing four quarters, delivering an average positive surprise of 20.5%. In the last reported quarter, the company reported earnings of 95 cents per share compared with 39 cents in the year-ago quarter. Also, the figure comfortably surpassed the Zacks Consensus Estimate by 29 cents.

Revenues increased 35.2% year over year to $301.1 million and came ahead of the Zacks Consensus Estimate of $291 million. The year-over-year growth was primarily driven by record revenues in TrueFlex reconfigurable optical add-drop multiplexer (ROADMs), commercial lasers and industrial diode laser.

For the first quarter, Lumentum expects revenues between $340 million and $360 million and earnings between 90 cents and $1.10 per share. 

The Zacks Consensus Estimate for first-quarter earnings is pegged at $1.03 per share, indicating year-over-year increase of 139.5%. Further, the consensus mark for revenues is pegged at $350.9 million, up roughly 44.3% from the year-ago quarter

Let’s see how things are shaping up for the upcoming announcement.

Factors Likely to Influence Q1 Results

In fourth-quarter 2018, Lumentum witnessed strong customer demand for its fiber laser products. The laser segment grew 7% sequentially, achieving record revenues. The momentum is expected to continue in the to-be-reported quarter.

Notably, the company also launched a new fiber laser platform in the last-reported quarter that broadened its customer base.

Further, laser based 3D sensing is a rapidly developing market and Lumentum has significant growth opportunities supported by its innovative product portfolio. Lumentum is progressing with its acquisition of Oclaro, which is expected to strengthen the company’s position in the fiber-optic components segment and make it a market leader in 3D sensing.

The company started shipping of VCSEL product in the last-reported quarter. Higher shipment of the product is expected to boost top-line growth. Additionally, Lumentum is witnessing strong ROADMs demand from China, which currently accounts for 20% of the company’s ROADM sales.

However, the company expects high margin lasers business revenues to decline in the first-quarter, primarily due to seasonality, which is likely to have an impact on overall operating margin. Moreover, higher expenses due to the establishment of a new manufacturing industry in Thailand are expected to keep margins under pressure.

Lumentum Holdings Inc. Price and EPS Surprise

What Our Model Says

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. The Sell-rated stocks (Zacks Rank #4 or #5) are best avoided.

Lumentum has a Zacks Rank #3 and an Earnings ESP of +3.34%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Other Stocks With a Favorable Combination

Here are some companies, which, per our model, also have the right combination of elements to post an earnings beat in their upcoming releases:

Imperva, Inc. has an Earnings ESP of +20% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

HubSpot (HUBS - Free Report) has an Earnings ESP of +136.4% and a Zacks Rank #2.

CenturyLink, Inc. (CTL - Free Report) has an Earnings ESP of +10.3% and a Zacks Rank #2.

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