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Lumentum (LITE) to Report Q4 Earnings: What's in Store?

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Lumentum Holdings (LITE - Free Report) is set to report fourth-quarter fiscal 2019 results on Aug 8.

Notably, the company’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters, the average positive surprise being 19.1%.

Lumentum reported earnings of 91 cents per share in the last reported quarter, which beat the Zacks Consensus Estimate by 6 cents and increased 16.7% on a year-over-year basis.

Net revenues of $432.9 million beat the consensus estimate of $430 million and surged 44.9% from the year-ago quarter. The growth was driven by strong demand for fiber lasers and reconfigurable optical add-drop multiplexer (ROADM) products, especially in China.

Lumentum Holdings Inc. Price and EPS Surprise

Lumentum Holdings Inc. Price and EPS Surprise

Lumentum Holdings Inc. price-eps-surprise | Lumentum Holdings Inc. Quote

Fourth Quarter Expectations Revised

Lumentum revised its fourth-quarter guidance, following the ban on Huawei. Notably, as of May 20, fiscal 2019 year-to-date sales to Huawei represented approximately 15% of revenues.

The company now expects revenues between $375 million and $390 million, down from the earlier guided range of $405-425 million.

Notably, the consensus mark for revenues is pegged at $385 million, indicating growth of 27.9% from the year-ago quarter’s reported figure.

Additionally, Lumentum also lowered its non-GAAP earnings guidance to the range of 65-77 cents from the previously guided range of 85 cents to $1 per share for the to-be-reported quarter.

The Zacks Consensus Estimate for fourth-quarter earnings per share has decreased 18 cents to 73 cents over the past 90 days. The figure indicates a decrease of 22.3% from the year-ago quarter reported figure.

The company also lowered non-GAAP operating margin guidance range to 15.5%-17% from the previously guided range of 18%-20%.

For fourth-quarter fiscal 2019, Lumentum expects 3D sensing revenues to be flat to slightly down, owing to seasonality. Moreover, Lasers revenues are expected to decline sequentially in the to-be-reported quarter.

Factors to Consider

Notably, on Apr 18, 2019, the company completed the divestiture of certain datacom product lines to Cambridge Industries. This is expected to hurt revenues in the to-be-reported quarter.

Lumentum witnessed increased interest from new customers for its datacom chips, which is expected to boost top-line growth. Further, continued strong demand for fiber lasers and ROADM are key catalysts

Moreover, growth is expected on the telecom front from continued demand in global network bandwidth requirements and for building infrastructure related to 5G.

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.  Sell-rated stocks (Zacks Rank #4 or 5) are best avoided.

Lumentum has a Zacks Rank #3 and an Earnings ESP of +2.13%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Other Stocks to Consider

Here are some companies, which, per our model, also have the right combination of elements to post earnings beat this quarter:

Ciena (CIEN - Free Report) has an Earnings ESP of +5.26% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here

CACI International (CACI - Free Report) has an Earnings ESP of +4.02% and a Zacks Rank #2.

Cisco Systems (CSCO - Free Report) has an Earnings ESP of +1.53% and a Zacks Rank #2.

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