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What Awaits Applied Optoelectronics (AAOI) in Q2 Earnings?

Zacks Equity Research

Applied Optoelectronics, Inc. AAOI is set to report second-quarter 2019 results on Aug 7.

The company’s earnings beat the Zack Consensus Estimate in two of the trailing four quarters, with an average positive surprise of 22.29%.

Past-Quarter Performance

In first-quarter 2019, Applied Optoelectronics had reported non-GAAP loss of 27 cents per share, which was wider than the Zacks Consensus Estimate for loss of 21 cents. Notably, the company reported earnings of 18 cents per share in the year-ago quarter.

Revenues of $52.7 million came slightly below the Zacks Consensus Estimate of $53 million. Further, the figure declined 19.2% on a year-over-year basis.

Estimates

For second-quarter 2019, the company expects revenues in the range of $40-$45 million. The Zacks Consensus Estimate for revenues is currently pegged at $42.82 million.

Further, the company anticipates non-GAAP loss between 35 cents and 43 cents per share. The consensus mark for loss is projected at 37 cents.

Let’s see how things are shaping up prior to this announcement.

Applied Optoelectronics, Inc. Price and EPS Surprise

 

Applied Optoelectronics, Inc. Price and EPS Surprise

Applied Optoelectronics, Inc. price-eps-surprise | Applied Optoelectronics, Inc. Quote

Factors to Consider

Applied Optoelectronics’ robust optical networking technology portfolio is a key growth driver in both data center and cable TV (CATV) markets and is likely to aid results in the to-be-reported quarter.

Moreover, in CATV market, the company’s platform, vertical integration and proprietary manufacturing process are expected to drive performance in the quarter under review.

Additionally, continued focus toward diversification of customer base and development of innovative optical products remain major positive. Further, its expanding presence in new markets, such as 5G, is acting as a tailwind and is likely to drive the second-quarter top line.

Further, the company’s strengthening technical engagement with customers for its next generation 400G products remain encouraging. Notably, Applied Optoelectronics’ expanding 400G product portfolio combined with cost advantages, owing to its manufacturing expertise and vertical integration, aids the company in maintaining its position in the data center market.

However, the market is currently sluggish, which is likely to act as dampener for the company’s second-quarter results. The market continues to face excess inventory and the company’s hyperscale customers are working through it.

Further, poor visibility and macro-economic headwinds in China are impacting customers’ CapEx deployment rate negatively and is likely to hurt the company in the to-be-reported quarter.

Notably, these headwinds are accounted for in the company’s second-quarter 2019 guidance.

What Our Model Says

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has good chance of beating estimates if it also has a positive Earnings ESP. The Sell-rated stocks (Zacks Rank #4 or 5) are best avoided. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Applied Optoelectronics has a Zacks Rank #5 (Strong Sell) and an Earnings ESP of -0.78%, which makes surprise prediction difficult.

Stocks to Consider

Here are a few of stocks you may consider, as our proven model shows that these have the right combination of elements to post an earnings beat this quarter.

Clearway Energy CWEN has an Earnings ESP of +15.00% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

JD.com JD has an Earnings ESP of +17.86% and a Zacks Rank #2.

Ciena CIEN has an Earnings ESP of +5.26% and a Zacks Rank #2.

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