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Finisar's (FNSR) Q2 Earnings Beat, Revenues Decline Y/Y

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Finisar Corporation (FNSR - Free Report) reported tepid second-quarter fiscal 2019 results (ended Oct 28, 2018), wherein both the bottom line and top line decreased year over year although the former beat the Zacks Consensus Estimate, while the latter missed the same.

Net Loss

On a GAAP basis, net loss for the reported quarter was $5.3 million or loss of 4 cents per share against net income of $5.9 million or 5 cents per share in the year-ago quarter. This was primarily due to lower revenues and higher start-up costs.

Non-GAAP net income improved to $30.6 million or 26 cents per share from $26.1 million or 23 cents per share in the prior-year quarter. The bottom line beat the Zacks Consensus Estimate by 5 cents.

Finisar Corporation Price, Consensus and EPS Surprise

Revenues

Quarterly revenues decreased 2% year over year to $325.4 million primarily due to lower revenues associated with 10-gig and Ethernet transceivers. The top line lagged the Zacks Consensus Estimate of $328 million.

Other Quarter Details

Cost of revenues was $239.2 million compared with $235.4 million in the year-ago quarter. In the fiscal second quarter, gross profit was $85.7 million compared with $96.2 million in the year-ago quarter with margin of 26.3% and 29%, respectively. Total operating expenses increased to $89.8 million from $86.7 million. Finisar reported an operating loss of $4.1 million against an income of $9.5 million in the prior-year quarter primarily due to lower gross profit and higher operating expenses.

Liquidity

As of Oct 28, 2018, Finisar had $332.1 million of cash and cash equivalents with $499.8 million of convertible debt (net of current portion).

The company’s cash and cash equivalents, and short-term investments increased nearly $11 million from the fiscal first quarter. Finisar has incurred capital expenditures associated with the progress on its new Sherman fab for VCSEL arrays for 3D sensing applications and the construction of the third building at its Wuxi, China manufacturing site.

The company did not provide guidance for the third quarter of fiscal 2019 due to the previously announced proposed acquisition by II-VI Incorporated (IIVI - Free Report) .

Zacks Rank & Stocks to Consider

Finisar currently has a Zacks Rank #3 (Hold). Better-ranked stocks in the broader industry include QUALCOMM Incorporated (QCOM - Free Report) and Ubiquiti Networks, Inc. (UBNT - Free Report) , both sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.          

Qualcomm has a long-term earnings growth expectation of 11.5%. It beat earnings estimates in each of the trailing four quarters, the average being 18.5%.  

Ubiquiti has a long-term earnings growth expectation of 14%. It surpassed earnings estimates in three of the trailing four quarters, the average positive surprise being 11.3%.

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