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Ciena (CIEN) to Report Q2 Earnings: What Lies in Store?

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Ciena Corporation (CIEN - Free Report) is scheduled to report second-quarter fiscal 2019 results (ended Apr 30, 2019) before the opening bell on Jun 6. In the last reported quarter, the company delivered a positive earnings surprise of 10%. Notably, Ciena surpassed the Zacks Consensus Estimate in three of the last four quarters, the average beat being 8%.

The company is expected to register higher revenues on a year-over-year basis, driven by diligent execution of operational strategies, including long-term investments to address customer needs in high-growth markets and applications.

Let’s find out how things are shaping up prior to the announcement.

Factors at Play

Ciena is confident about its business model and ability to achieve its three-year financial targets on the back of diversification, global scale and innovation leadership. The company has been working to enhance its Packet Networking portfolio with new Adaptive IP capabilities, coherent optics and purpose-built hardware platforms to enable service providers to capitalize on 5G technology.

During the fiscal second quarter, Ciena extended its leadership in coherent optics with the introduction of the latest WaveLogic technology that supports greater scale, programmability and intelligence from network edge to core. Ciena’s solutions help to address the exponential growth of demand for data center interconnect applications for cloud, IoT, video, 5G, Fiber Deep and edge computing. In addition to improved network economics, these products help to expand footprint at lower costs and have fueled huge customer interests.

In particular, Ciena inked an agreement with BT Group to enable faster network scalability for supporting mobile data growth and surging residential broadband traffic by leveraging its Waveserver solutions. With up to 2.4T of capacity per stackable device, Waveserver supports high-speed data transfer, virtual machine migration, disaster recovery and backup between data centers at economical cost. This offers multiple low-latency connections to data centers while reducing cost-per-bit through greater efficiency.

Ciena also entered into an agreement with Bharti Airtel, India’s leading telecom service provider, to deploy its coherent optical and intelligent software platforms for super-fast broadband experiences over 4G/5G/FTTH architectures. In addition to low latency and software-controlled connectivity for cloud infrastructure, it will offer faster transformation to virtualized platforms and 5G readiness. The platform will support high bandwidth and dynamic data center interconnects, hence providing a unique value proposition for Airtel’s retail and enterprise customers.

Backed by such innovative and state-of-the-art product offerings, Ciena is likely to record higher revenues in the quarter.

Top-Line Expansion

Ciena is poised to benefit from strong fundamental demand drivers, particularly at a time when cloud providers are increasingly investing in their network infrastructure assets to drive business. In addition, the company boasts a solid position with more than 40% market share in the global webscale Data Center Interconnect market. For the fiscal second quarter, the Zacks Consensus Estimate for total revenues is pegged at $816 million. The company generated revenues of $730 million in the prior-year quarter. Adjusted earnings per share are pegged at 40 cents, up from 23 cents reported a year ago.

Earnings Whispers

Our proven model does not show that Ciena is likely to beat earnings this quarter as it does not possess the key components. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is perfectly the case here as you will see below:

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is -0.83%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Ciena Corporation Price and EPS Surprise

Ciena Corporation Price and EPS Surprise

Ciena Corporation price-eps-surprise | Ciena Corporation Quote

Zacks Rank: Ciena has a Zacks Rank #3. Although this increases the predictive power of ESP, we need to have a positive ESP to make us reasonably confident of an earnings beat.

Note that we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated) going into the earnings announcement, especially when the company is seeing a negative estimate revisions momentum.

Stocks to Consider

Here are some companies that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Lululemon Athletica Inc. (LULU - Free Report) is slated to release quarterly numbers on Jun 12. It has an Earnings ESP of +1.57% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

American Outdoor Brands Corporation (AOBC - Free Report) is expected to release results on Jun 19. The company has an Earnings ESP of +9.09% and has a Zacks Rank #2.

The Earnings ESP for General Mills, Inc. (GIS - Free Report) is +1.18% and it carries a Zacks Rank of 2. The company is likely to report quarterly numbers on Jun 26.

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