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Can Higher Networking Revenues Aid Ciena (CIEN) Q2 Earnings?

Zacks Equity Research
Updated

Ciena Corporation CIEN is scheduled to report second-quarter fiscal 2018 financial results (ending Apr 28, 2018) before the opening bell on May 31. The company is likely to report higher consolidated revenues led by healthy growth dynamics.

Whether this could result into an earnings beat remains to be seen.

Factors to Consider

During the quarter, Ciena’s GeoMesh solution was selected by Sweden-based Eastern Light to help meet the region’s fast-growing demand for long-haul dark fiber. The company also unveiled 5G network solutions to help operators expand their 4G networks and prepare for 5G.

Ciena’s 6500 packet-optical platform was deployed by U.K.-based Jisc to provide Janet Network, the first National Research and Education Network, with high-capacity 400G wavelength connectivity.

In the fiscal second quarter, the company added an important aggregation, scale and programmability capability. The company’s new 8180 and 6500 Reconfigurable Line System platforms helped to tackle network complexity by combining massive bandwidth scalability and aggregation with integrated intelligence and programmability to improve end-user experience.

Furthermore, in the quarter, Ciena introduced an enhanced policy capability into its Blue Planet intelligent automation platform that incorporates the architectural framework from the Linux Foundation’s open-source Open Networking Automation Platform to aid network providers’ evolution to more adaptive, software-centric networks.

The Zacks Consensus Estimate for total revenues for the Networking Platforms segment, which accounts for the lion’s share of total revenues, is currently pegged at $574 million, up from $572 million reported in second-quarter fiscal 2017. Revenues from Global Network Service segment are expected to be $103 million compared with $98 million reported in the prior-year quarter. Revenues from Software and Services are estimated to be $49.7 million compared with $37.7 million reported in the year-ago quarter. Consequently, Ciena’s consolidated revenues for the quarter are likely to be $730 million, up from $707 million reported in the year-earlier quarter.

What Our Model Says

Our proven model does not conclusively show that Ciena is likely to beat earnings this quarter as it does not possess one of the two key components. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is not the case here as you will see below:

Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is -0.19%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter. 

Ciena Corporation Price and EPS Surprise
 

Ciena Corporation Price and EPS Surprise | Ciena Corporation Quote

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Zacks Rank: Ciena has a Zacks Rank #3, which when combined with a negative ESP, makes surprise prediction difficult.   

Note that we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated) going into the earnings announcement, especially when the company is seeing a negative estimate revisions momentum.

Stocks to Consider

Here are some companies that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Herc Holdings Inc. HRI has an Earnings ESP of +100.00% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Hecla Mining Company HL has an Earnings ESP of +49.99% and a Zacks Rank #2.

Safe Bulkers, Inc. SB has an Earnings ESP of +50.00% and a Zacks Rank #2.

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Herc Holdings Inc. (HRI) : Free Stock Analysis Report
 
Safe Bulkers, Inc (SB) : Free Stock Analysis Report
 
Ciena Corporation (CIEN) : Free Stock Analysis Report
 
Hecla Mining Company (HL) : Free Stock Analysis Report
 
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