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Ciena (CIEN) Beats on Q1 Earnings Despite Revenue Contraction

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Ciena Corporation CIEN reported relatively healthy first-quarter fiscal 2021 (ended Jan 30, 2021) results with both the top and bottom line surpassing the Zacks Consensus Estimate. However, guidance for the second quarter failed to meet investors’ expectations and the stock fell 3.3% to close at $48.87 post the earnings release.

Net Income

On a GAAP basis, net income in the quarter was $55.3 million or 35 cents per share compared with $62.3 million or 40 cents per share in the year-ago quarter. The year-over-year decline, despite lower operating expenses, was primarily attributable to top-line contraction.

Adjusted net income was relatively flat at $81.3 million or 52 cents per share and beat the Zacks Consensus Estimate by 7 cents.

Ciena Corporation Price, Consensus and EPS Surprise

Ciena Corporation Price, Consensus and EPS Surprise
Ciena Corporation Price, Consensus and EPS Surprise

Ciena Corporation price-consensus-eps-surprise-chart | Ciena Corporation Quote

Revenues

Total revenues were down 9.1% year over year to $757.1 million, primarily due to the COVID-19 adversities. The top line, however, beat the consensus estimate of $750 million.

Region-wise, revenues in the Americas were $496.6 million, down 13.5% year over year owing to the virus outbreak and consequent lockdown restrictions. Revenues in Europe, Middle East and Africa were $155.4 million, up from $130 million with encouraging signs of recovery from certain markets. Asia-Pacific revenues totaled $105.1 million, down 18.5%.

Quarterly Segment Results

Total revenues in Networking Platforms decreased 12.5% year over year to $576.6 million. Platform Software and Services revenues were $49.9 million compared with $51.9 million in the prior-year quarter. Blue Planet Automation Software and Services revenues increased from $15.5 million to $16.9 million. Revenues in Global Services were $113.7 million, up 6.8%.

Other Details

Adjusted gross margin was 48% compared with 45.1% in the year-ago quarter. Adjusted operating expenses were $253 million, down from $266.4 million. Operating income declined to $75.8 million from $78 million, while adjusted operating income increased to $110.7 million from $109.4 million. Adjusted operating margin came in at 14.6% compared with 13.1% in the prior-year quarter. Adjusted EBITDA was $133.8 million, down from $135.3 million.

Cash Flow & Liquidity

In first-quarter fiscal 2021, Ciena utilized $7.3 million of cash for operating activities against cash flow of $39.8 million in the year-ago period. The company repurchased 0.3 million shares for $13.2 million in the quarter. As of Jan 30, 2021, the company had $1,029.2 million in cash and cash equivalents with $674.9 million of net long-term debt.

Guidance

For the fiscal second quarter, the company expects revenues in the range of $810-$840 million with adjusted gross margin of 45-47%. For fiscal 2021, revenues are likely to grow 0-3% year over year with adjusted gross margin of 45-47% and adjusted operating margin of 15-16%. Management expects to witness a strong rebound in the second half of the fiscal as the markets gradually return to pre-pandemic levels. Increased network traffic, higher demand for bandwidth and adoption of cloud architectures remain key growth drivers as the company expects to improve its profitability with a balanced mix of new and existing customers.

Zacks Rank & Stocks to Consider

Ciena currently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader industry are Knowles Corporation KN, sporting a Zacks Rank #1 (Strong Buy), and Corning Incorporated GLW and Viavi Solutions Inc. VIAV, both carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Knowles has a long-term earnings growth expectation of 10%. It delivered a positive earnings surprise of 19.3%, on average, in the trailing four quarters.

Corning has a long-term earnings growth expectation of 2%. It delivered a positive earnings surprise of 41.6%, on average, in the trailing four quarters.

Viavi delivered a trailing four-quarter earnings surprise of 20.2%, on average.

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Ciena Corporation (CIEN) : Free Stock Analysis Report

Corning Incorporated (GLW) : Free Stock Analysis Report

Knowles Corporation (KN) : Free Stock Analysis Report

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