On Mar 25, 2015, Zacks Investment Research upgraded JDS Uniphase Corp. JDSU by a notch to a Zacks Rank #3 (Hold).
Except for the last quarter, JDS Uniphase has delivered positive earnings surprises in three quarters last year, with an average beat of 32.32%. Moreover, in the second quarter of 2015, the company maintained positive operating cash flow for the 33rd consecutive quarter with a strong cash position of nearly $838.7 million and a favorable debt-to-capitalization ratio of 0.32.
Even, the overall book-to-bill ratio for the company in the reported quarter stood above 1. Moreover, the company is highly optimistic about boosting its operating profits by $50 million with the successful split of the organization.
A strong product line-up coupled with the acquisition of Trendium, Network Instruments and Arieso are likely to act as tailwinds for the company going forward. Moreover, higher Internet usage and associated applications have propelled demand for components and modules used in 3G/4G high-speed communication networks, which is likely to benefit JDS Uniphase in the long run.
Recently, SoftBank Mobile of Japan struck a deal with JDSU xSIGHT Customer Experience Assurance solution to optimize the scale and quality of experience (QoE) of its LTE services. JDS Uniphase also won a contract from British Telecom to efficiently incorporate BT Sport networks into its internet protocol television (IPTV) service.
Despite witnessing an increase in revenues, JDS Uniphase continues to report losses. Moreover, the Network Enablement segment’s revenues declined 8.5% year over year while Optical Communications revenues within the Products segment dropped 5.2%. Further, the overall book-to-bill ratio was less than 1 in the reported quarter.
The ongoing global economic fluctuations may significantly affect the prospects of JDS Uniphase. Moreover, the consolidation trend of wireless networks and data centers will worsen the situation. The optical component industry is highly cyclical in nature and is characterized by extreme price volatility. In addition, weaker-than-expected market recovery will affect the situation.
Stocks That Warrant a Look
Better-ranked stocks that belong to the sector include Arista Networks, Inc. ANET, Alcatel-Lucent ALU and Envivio, Inc. ENVI. All the stocks have a Zacks Rank #2 (Buy).
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