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Ciena Corp (CIEN) to Report Q1 Earnings: What's in Store?

Zacks Equity Research

Ciena Corporation CIEN is set to report first-quarter fiscal 2017 earnings on Mar 8. Last quarter, the company reported earnings of 38 cents per share, which missed the Zacks Consensus Estimate by a penny.

However, revenues of $716.2 million topped the consensus mark of $715.9 million. Moreover, on a year-over-year basis, earnings and revenues grew 40.7% and 3.5%, respectively.

Over the trailing four quarters, the company posted an average positive earnings surprise of 15.92%.

Ciena Corporation Price and EPS Surprise

Ciena Corporation Price and EPS Surprise | Ciena Corporation Quote

However, the positive earnings surprise failed to boost the share price in the last one year. While Ciena gained 55.2%, the stock underperformed the Zacks Fiber Optics industry’s gain of 83.8% over the same period.

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

Factors Influencing This Quarter

Rising demand for Packet Optical, Packet Networking and Optical Transport products and increasing use of service management software in the global communication market are positives for Ciena.

Expanding Waveserver customer base is also an encouraging factor. During the quarter, the platform was selected by the likes of QTS Realty Trust. We also note that the company’s Blue Planet V-WAN platform was selected by Southern Cross Cable Network. Additionally, Ciena’s Packetwave platform was also chosen by Quintillion in the quarter.

We believe that customer wins will drive Ciena’s top-line growth in the to-be-reported quarter. Management expects revenues in the range of $615–$645 million for the first quarter of fiscal 2017.

Further, adjusted gross margin is anticipated to be in the mid-40s range, while adjusted operating expenses are likely to be in the range of $220–$225 million, up sequentially.

However, rising competition from the likes of Cisco Systems Inc. CSCO and Hewlett Packard HPE continues to threaten Ciena’s market potential.

Earnings Whispers

Our proven model does not conclusively show that Ciena is likely to beat earnings estimates this quarter. This is because 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: Ciena’s Earnings ESP is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 20 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Ciena carries a Zacks Rank #3, which increases the predictive power of ESP. However, we need to have a positive ESP to be confident about an earnings surprise.

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

A Stock That Warrants a Look

Here’s a company that you may want to consider as our model shows that it has the right combination of elements to post an earnings beat in its upcoming release:

Micro Technology MRVL has an Earnings ESP of +8.7% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

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