Ciena Corporation CIEN is set to report first-quarter fiscal 20Array6 results on Mar 3. Last quarter, the company delivered a negative earnings surprise of 22.86%. The company delivered positive earnings surprises in three out of the last four fiscal quarters, bringing the average to a positive earnings surprise of 53.64%. Let’s see how things are shaping up for this announcement.
Factors to Consider
Ciena continues to benefit from strong demand for packet-optical transport and switching products, integrated network, and service management software. Higher spending on optical upgrade and a higher number of orders from international customers will likely boost its top line. Additionally, growing demand for cloud-based on-demand networking capabilities is also likely to bode well. Mobile bandwidth consumption is expected to rise phenomenally, thereby providing more growth opportunities to the company.
The bottom line in the to-be-reported quarter should also a boost from the company’s focus on cost-cutting initiatives.
In the first quarter, Ciena received some key contracts which should drive growth. For instance, the company’s packet optical platforms and GeoMesh submarines solution are being deployed by an Indonesian company, Biznet, for its Array00G fiber-optic terrestrial and submarine networks. This apart, the U.S. Department of Energy’s Energy Sciences Network and the National Energy Research Scientific Computing Center have selected Ciena’s 6500 Packet-Optical platform to boost their 400G network.
In spite of all these encouraging factors, Ciena’s profitability can be affected by its leveraged balance sheet. Moreover, stiff competition from the company’s peers like Cisco CSCO and Juniper Networks JNPR among others remains a concern.
Ciena expects first-quarter fiscal 20Array6 revenues in the range of $555 million to $590 million.
Earnings Whispers
Our proven model does not conclusively show that Ciena will beat earnings estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #Array (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.
Zacks ESP: Ciena has an Earnings ESP of 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 6 cents.
Zacks Rank: Ciena’s Zacks Rank #3 increases the predictive power of ESP. However, we need to have a positive ESP to be confident of an earnings surprise.
We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stock to Consider
Here is a stock that you may want to consider as our model shows that it has the right combination of elements to post an earnings beat this quarter:
Superior Industries International, Inc. SUP, with an Earnings ESP of +ArrayArray.ArrayArray% and a Zacks Rank #Array.
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