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Why Is Ciena (CIEN) Up 5% Since Last Earnings Report?

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It has been about a month since the last earnings report for Ciena (CIEN - Free Report) . Shares have added about 5% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Ciena due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Ciena Q4 Earnings Beat Estimates, Revenues Rise Y/Y

Ciena reported healthy fourth-quarter fiscal 2018 (ended Oct 31, 2018) results wherein both the top line and the bottom line surpassed the respective Zacks Consensus Estimate.

Net Income

On a GAAP basis, net income for the reported quarter was $64 million or 34 cents per share compared with $1,160.1 million or $7.32 per share in the year-ago quarter. The year-over-year decrease was primarily due to higher cost of goods sold and lower benefit from income tax. For fiscal 2018, net loss was $344.7 million or loss of $2.49 per share against income of $1,262 million or $7.53 per share a year ago, mainly due to higher income tax expenses. Non-GAAP net income came in at $81 million or 53 cents per share compared with $48.5 million or 32 cents per share in the year-ago quarter. The bottom line beat the Zacks Consensus Estimate by 4 cents.

Revenues

Quarterly total revenues increased 20.8% year over year to $899.4 million, primarily due to higher product sales. The top line surpassed the Zacks Consensus Estimate of $861 million. Fiscal 2018 revenues increased 10.4% year over year to $3,094.3 million. Geographically, revenues from North America were $555.3 million, up 26.1% year over year. Revenues from Europe, Middle East and Africa were $123.1 million, up 11.2%. In Caribbean and Latin America revenues totaled $53 million, up 21.8% and in Asia Pacific revenues were $168 million, up 12.2%.

Other Quarter Details

Gross margin was 44.3% compared with 43.7% in the year-ago quarter. Operating expenses were $302.2 million compared with $269.9 million a year ago. Operating margin was 10.7% compared with 7.5% in the prior-year quarter. Adjusted EBITDA was $145.8 million, up from $109.7 million.

Segmental Performance

Revenues from Networking Platforms increased 19% year over year to $712.9 million. Software and Software-Related Services revenues were $67.3 million compared with $41.8 million in the prior-year quarter. Revenues from Global Services were $119.2 million compared with $103.7 million a year ago.

Share Repurchases

During the quarter, Ciena repurchased approximately 1.3 million shares for an aggregate amount of $36.2 million. During fiscal 2018, the company repurchased approximately 4.3 million shares at an average price of $25.86 per share for an aggregate amount of $111 million.

Cash Flow and Liquidity

In fiscal 2018, Ciena generated $229.3 million of cash from operating activities compared with $234.9 million in fiscal 2017. As of Oct 31, 2018, Ciena had $745.4 million of cash and cash equivalents and $686.5 million of net long-term debt.

How Have Estimates Been Moving Since Then?

Fresh estimates followed an upward path over the past two months. The consensus estimate has shifted 10.35% due to these changes.

VGM Scores

Currently, Ciena has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% 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.

Outlook

Ciena has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.




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