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Ciena (CIEN) Up 1.7% Since Last Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for Ciena (CIEN - Free Report) . Shares have added about 1.7% 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 the most recent earnings report in order to get a better handle on the important catalysts.

Ciena Q3 Earnings Beat Estimates, Revenues Up Y/Y

Ciena reported better-than-expected results in third-quarter fiscal 2018 (ended Jul 31, 2018).

Net Income

On a GAAP basis, net income for the reported quarter came in at $50.8 million or 34 cents per share compared with $60 million or 39 cents per share in the year-ago quarter. The year-over-year decrease was primarily attributable to increase in cost of goods sold.

Non-GAAP net income was $74.3 million or 48 cents per share compared with $56.4 million or 35 cents per share in the year-ago quarter. Notably, the bottom line beat the Zacks Consensus Estimate of 35 cents.

Revenues

Quarterly total revenues increased 12.4% year over year to $818.8 million, driven by continued growth in APAC (Asia Pacific) service providers and global webscale customers. Notably, India’s quarterly revenues were up an impressive 100%.

Also, the top line surpassed the Zacks Consensus Estimate of $791.72 million.

Operating Metrics

Gross margin was 42.9% compared with 45% in the year-ago quarter. Operating expenses were $266.3 million compared with $246.1 million a year ago. Operating margin was 10.4% compared with 11.3% in the prior-year quarter.

Adjusted EBITDA was $136.1 million, up from $122.8 million.

Segmental Performance

Revenues from Networking Platforms increased 14.4% year over year to $677.4 million. Software and Software-Related Services revenues were $41.2 million compared with $42.3 million in the prior-year quarter. Revenues from Global Services were $100.2 million compared with $94.1 million a year ago.

Share Repurchases

During the quarter, Ciena repurchased approximately 1.4 million shares of common stock for an aggregate amount of $35.6 million.

Cash Flow

During the quarter, Ciena generated $88.1 million as cash from operating activities while its free cash flow amounted to $69.7 million. Cash flow for the first nine months of fiscal 2018 improved to $161.2 million from $96.3 million in the prior-year period.

Liquidity

As of Jul 31, 2018, Ciena had $726.2 million of cash and cash equivalents and $586.5 million of net long-term debt.

The company ended the quarter with approximately $985 million in cash and investments.

How Have Estimates Been Moving Since Then?

Fresh estimates followed a downward path over the past two months.

VGM Scores

At this time, Ciena has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. Charting a somewhat similar path, 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 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 #2 (Buy). We expect an above average return from the stock in the next few months.


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