Will Top-Line Growth Support Ciena's (CIEN) Q4 Earnings?
Zacks Investment Research | Dec 10, 2018 09:47PM ET
Ciena Corporation (NYSE:CIEN) is scheduled to report fourth-quarter fiscal 2018 financial results (ended Oct 31, 2018) before the opening bell on Dec 13. In the last reported quarter, the company delivered a positive earnings surprise of 37.1%.
Let’s find out how things are shaping up prior to the announcement.
Factors to Consider
Ciena remains confident about its business model and ability to achieve the three-year financial targets on the back of its diversification, global scale and innovation leadership. The company is augmenting its Packet Networking portfolio with new Adaptive IP capabilities, coherent optics and purpose-built hardware platforms to enable service providers to capitalize on 5G.
During the fiscal fourth quarter, Ciena announced that Tele2 Netherlands — a leading regional telecommunications service provider — deployed its WaveLogic Ai coherent optical solution to increase the latter’s network capacity and minimize operating expenses. The company also announced that Hawaiki Submarine Cable LP — a new entrant in the telecommunications market — selected its GeoMesh Extreme solution based on Waveserver Ai and various packet-optical networking platforms to deliver unmatched connectivity to Australia, New Zealand, the Pacific Islands and the United States.
Furthermore, Ciena announced that Deutsche Telekom (DE:DTEGn) Global Carrier — the international wholesale arm of Deutsche Telekom — deployed the company’s WaveLogic Ai coherent optical solution to boost bandwidth services and reach longer distances across the latter’s network. Although these deals are not likely to have a significant impact on the top line, incremental revenues will enable the company to attract similar deals in the future and strengthen its leading position in the market.
For fiscal fourth quarter, management expects revenues to be between $845 million and $875 million. It expects to deliver gross margin in the low 40s. The company projects operating expenses to be approximately $255 million and expects it to be slightly higher in the quarter due to the 53-week fiscal year and the addition of Packet Design.
Top-Line Expansion
Owing to a combination of solid strategy execution and broad-based customer demand, Ciena expects to witness a year-over-year improvement in revenues for the quarter. The Zacks Consensus Estimate for revenues from the Networking Platforms segment, which accounts for the lion’s share of total revenues, is currently pegged at $700 million. Revenues from Software and Software-Related Services are expected to be $49.3 million compared with $24.5 million reported in the year-ago quarter. Revenues from Global Services are estimated to be $111 million. Consequently, for the fiscal fourth quarter, the Zacks Consensus Estimate for total revenues stands at $860 million. Notably, it generated revenues of $744 million in the year-earlier quarter. Adjusted earnings per share are pegged at 49 cents, up from 46 cents reported a year ago.
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What Our Model Says
Our proven model conclusively shows that Ciena is likely to beat earnings this quarter as it possesses both the two key components. A stock needs to have both a positive Zacks Investment Research
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