Alliance Fiber Optic Products Inc. (AFOP) reported third-quarter 2014 adjusted earnings of 23 cents a share, which was well below the Zacks Consensus Estimate of 31 cents by 25.8%.
On GAAP basis, the company reported net income of $4.3 million or 23 cents per share, compared with the prior-year quarter’s tally of $5.6 million or 31 cents a share.
Revenues slipped 21.6% year over year to $18.1 million and also lagged the Zacks Consensus Estimate of $24 million.
Results were impacted by weaker demand from a primary customer, possibly due to softening market conditions in the optical network domain. Both telecom and datacom segments witnessed a decline in revenues with telecom being more vulnerable. This apart, adverse currency translation also remained a headwind during the reported quarter.
Income and Expenses
Gross profit in the quarter came in at $7.1 million, a decline from $8.9 million in the prior-year quarter. However, gross margin improved to 39.5% from 38.4% in the year-ago quarter.
Alliance Fiber Optic’s operating income was $4.1 million compared with $5.7 million reported in the year-ago quarter. Operating margin also came in lower at 22.9% from 24.5% in the prior-year quarter.
The company incurred total research & development costs of about $1.1 million and selling, marketing and administrative expenses of $1.9 million in the quarter.
Other Financial Details
Alliance Fiber Optic’s cash and short-term investments totaled approximately $62.2 million, compared with $46.7 million as of Dec 31, 2013. The company’s long-term liabilities stood at $0.6 million, with shareowners’ equity of $94.3 million at the end of the quarter.
Outlook
Alliance Fiber Optic expects fourth-quarter revenues in the range of $19–$20 million. The company is optimistic about full-year 2014 revenues, backed by increasing demand for its products, especially data bandwidth in both telecom and datacom divisions. This apart, demand for converting the copper technology to fiber technology in data centers is also on a rise, which is likely to be a positive for the company going forward.
Zacks Rank
Alliance Fiber Optic presently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the sector include ClearOne, Inc. (CLRO), Gigamon Inc. (GIMO) and SeaChange International Inc. (SEAC). All these stocks sport a Zacks Rank #1 (Strong Buy).
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