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Ciena (CIEN) Q2 Earnings Miss Estimates, Revenues Up Y/Y

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Ciena Corporation CIEN reported tepid second-quarter fiscal 2022 (ended Apr 30, 2022) results, with adjusted earnings of 50 cents per share missing the Zacks Consensus Estimate by 7.4% and declining 19.4% year over year.

Quarterly total revenues rose 13.8% year over year to $949.2 million, owing to strong demand trends. The top line, however, missed the consensus metric of $952.9 million. Widespread supply chain issues remain an overhang.

The company had one 10%-plus customer, contributing 11% to total revenues in the fiscal second quarter of 2022. Ciena’s non-telco revenues (44% of total revenue) was up 15% year over year in the fiscal second quarter.

Region-wise, revenues in the Americas were $700.8 million, up 19.3% year over year. Revenues in Europe, the Middle East and Africa were $145.1 million, down 6.4% from the prior-year quarter’s levels. Revenues in the Asia Pacific totaled $103.3 million, up 13% from the prior-year quarter’s tally.

The Hanover, MD-based networking systems and services company’s share price dropped 1.3% on Jun 2, closing the session at $50.68. However, shares are up 0.5 % in the premarket trading. In the past year, shares have lost 13.2% of their value as against industry’s decline of 13%.

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

 

Segment Results

Total revenues in Networking Platforms rose 15.3% year over year to $734.5 million. However, the reported figure beat the consensus mark of $722 million.

Platform Software and Services revenues totaled $69.1 million, up 21.9% from the prior-year quarter’s levels. The reported figure missed the consensus mark of $76 million.
 
Blue Planet Automation Software and Services revenues decreased 29.3% to $16.9 million. The reported figure missed the consensus mark of $23.2 million.

Total revenues in Global Services were $128.7 million, up 11% year over year but missing the consensus mark of $133 million.

Other Details

Non-GAAP adjusted gross margin was 43% compared with 49.2% in the year-ago quarter, significantly affected by higher component costs and logistics expenses. Adjusted operating expenses were $301.1 million, up 8% from the last-year quarter.

Non-GAAP adjusted operating margin came in at 11.3% compared with 15.8% in the prior-year quarter. Non-GAAP adjusted EBITDA declined 17.2% year over year to $129.3 million.

The company repurchased approximately 1.5 million shares worth $87 million in the fiscal second quarter as part of the $1 billion stock repurchase program.  Ciena also received 0.9 million shares related to the final settlement of the Accelerated Share Repurchase program, in the reported quarter.

Cash Flow & Liquidity

During the fiscal second quarter, Ciena’s net cash provided by operating activities was $106 million compared with $225 million in the prior-year quarter.

As of Apr 30, 2022, the company had $1,019.8 million in cash and cash equivalents and $1,062.2 million of net long-term debt compared with the respective tallies of $1,118.6  million and $1,065.2 million a year ago.

Guidance

For the fiscal third quarter, the company expects revenues of $870-$930 million. Adjusted gross margin is estimated to be in the low 40% range. Adjusted operating expenses are estimated to be in the range of $305-$310 million.

For fiscal 2022, the company now expects revenue growth to be in the mid-single digits compared with the earlier expected range of 11-13%. The slashing of outlook is driven by the uncertainty stemming from supply chain troubles. Adjusted gross margin is estimated to be in the low 40% range compared with the earlier guidance of 43- 46%.

Adjusted operating expenses are projected to average $300 million per quarter. Adjusted operating margin is now projected to be in the low double-digits compared with the earlier guidance of 15-16%.

Zacks Rank & Other Stocks to Consider

At present, Ciena carries a Zacks Rank #2 (Buy).

A few better-ranked stocks from the broader technology sector worth consideration are InterDigital IDCC Avnet AVT and Flex FLEX. InterDigital and Avnet sport a Zacks Rank #1 (Strong Buy), while Flex carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Flex’s fiscal 2023 earnings is pegged at $2.16 per share, up 1.4% in the past 60 days. The long-term earnings growth rate is pegged at 14.9%.

Flex’s earnings beat the Zacks Consensus Estimate all last four quarters, with the average being 21.1%. Shares of FLEX have declined 8.8% in the past year.
The Zacks Consensus Estimate for InterDigital 2022 earnings is pegged at $3.28 per share, up 5.1% in the past 60 days. IDCC’s long-term earnings growth rate is pegged at 15%.

InterDigital’s earnings beat the Zacks Consensus Estimate in all the preceding four quarters, with the average being 141.1%. Shares of IDCC have lost 20.9% of their value in the past year.

The Zacks Consensus Estimate for Avnet’s fiscal 2022 earnings is pegged at $6.83 per share, rising 20.5% in the past 60 days. The long-term earnings growth rate is anticipated to be 37.2%.

Avnet’s earnings beat the Zacks Consensus Estimate in all of the last four quarters, the average being 21.22%. Shares of Avnet have grown 11.3% in the past year.


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