Ciena Earnings Top Estimates, but Stock Slides on Guidance Cut -- Barrons.com

11:30 am ET June 4, 2020 (Dow Jones) Print

 

By Eric J. Savitz

Ciena shares are trading lower Thursday after the networking hardware company posted solid results for its fiscal first quarter ended May 2, but reduced its outlook for the full fiscal year ending in October.

For the quarter, Ciena (ticker: CIEN) reported revenue of $894.1 million, up 3.4% from a year ago and in the middle of its guidance range of $875 million to $905 million. Wall Street analyst consensus had been $881.5 million. The company posted non-GAAP profits of 76 cents a share, well ahead of the Street consensus at 49 cents.

For the fiscal third quarter, Ciena sees revenue of $955 million to $985 million; at the midpoint of the range, that's slightly ahead of the Street's $961.3 million.

For the full fiscal year, Ciena sees revenue up 2%-4%, which is down from a previous forecast for revenue toward the lower end of its standard target range of 6%-8%.

"In this uncertain environment, we delivered industry leading financial performance during our second quarter, including strong revenue and outstanding profitability," Ciena CEO Gary Smith said in a statement. "Our strategy, centered around innovation, diversification and global scale, has resulted in a resilient business capable of navigating challenging times and delivering strong shareholder value over the long-term."

Evercore ISI analyst Amit Daryanani points out in a research note Thursday morning that results were driven by 30% growth from "webscale" cloud-services companies, offsetting a 10% decline in the company's core telco business. He also notes that gross margin at 46.9% was well ahead of his estimate at 42.5%.

"While demand has remained strong, social distancing requirements make it challenging to engage with customers in the validation and installation process," the analyst writes. "We think this revenue is delayed rather than lost and investors should focus on the potential for growth to exceed the 6-8% target in fiscal 2021." Daryanani repeats his Outperform rating, while lifting his price target to $62 from $60.

Ciena shares are down 4.5%, at $53.70, in recent trading. For the year to date, Ciena shares have rallied 26% higher, while the S&P 500 is down 3.5%.

Write to Eric J. Savitz at eric.savitz@barrons.com

 

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June 04, 2020 11:30 ET (15:30 GMT)