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Why Is Finisar (FNSR) Down 5.4% Since Last Earnings Report?

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It has been about a month since the last earnings report for Finisar . Shares have lost about 5.4% in that time frame, underperforming the S&P 500.

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

Finisar’s Q3 Earnings Beat, Revenues Decline Y/Y

Finisar's third-quarter fiscal 2019 (ended Jan 27, 2019) revenues decreased year over year but net loss narrowed. The bottom-line performance was largely driven by lower provision for income tax and reduction in manufacturing overhead.

Net Loss

On a GAAP basis, net loss for the reported quarter was $15.3 million or loss of 13 cents per share compared with net loss of $55.7 million or loss of 49 cents per share in the year-ago quarter. The year-over-year improvement was driven by higher operating income and lower provision for income tax.

Notably, non-GAAP net income came in at $34.2 million or 29 cents per share compared with $22.8 million or 20 cents per share in the prior-year quarter on the back of favorable adjustments. The bottom line beat the Zacks Consensus Estimate by 2 cents.

Revenues

Quarterly revenues decreased 1.4% year over year to $327.6 million primarily due to decline in sales of 10G and Ethernet transceivers. The top line lagged the consensus estimate of $343 million.

Other Quarterly Details

Cost of revenues was $232.7 million compared with $243.7 million in the year-ago quarter. Gross profit was $94.4 million compared with $88.1 million in the year-ago quarter. Margin was 28.8% compared with 26.5% in the year-ago period. Higher margin could be attributed to favorable product mix and decrease in manufacturing costs. Total operating expenses decreased to $93.9 million from $94.2 million. Finisar reported operating income of $0.5 million against a loss of $6.1 million in the prior-year quarter, primarily due to higher gross profit and lower operating expenses.

Liquidity

As of Jan 27, 2019, Finisar had $906.9 million in cash and equivalents with $506.5 million of convertible debt (net of current portion).

The company did not provide guidance for the fourth quarter of fiscal 2019 due to its previously announced proposed acquisition by II-VI Incorporated.

How Have Estimates Been Moving Since Then?

Fresh estimates followed an upward path over the past two months. The consensus estimate has shifted 8.33% due to these changes.

VGM Scores

At this time, Finisar has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

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

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