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Lumentum (LITE) Q3 Earnings & Revenues Lag Estimates

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·4 min read
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Lumentum Holdings LITE reported third-quarter fiscal 2021 non-GAAP earnings of $1.40 per share, which missed the Zacks Consensus Estimate by 1.4%. However, the bottom line increased 11.1% year over year.

Net revenues of $419.5 million also fell short of the Zacks Consensus Estimate by 3.5%. However, the top line increased 4.1% from the year-ago quarter’s levels. The company deferred $14.8 million revenues due to delay in 5G deployments in China.

Following lower-than-expected fiscal third quarter results, shares of Lumentum fell 16.9% on May 12 and closed at $68.24. In the past year, the company’s stock has declined 6.8% against the industry’s return of 18.3%.

Lumentum Holdings Inc. Price, Consensus and EPS Surprise

Lumentum Holdings Inc. Price, Consensus and EPS Surprise
Lumentum Holdings Inc. Price, Consensus and EPS Surprise

Lumentum Holdings Inc. price-consensus-eps-surprise-chart | Lumentum Holdings Inc. Quote

Top-Line Details

Optical Communications segment (92.5% of net revenues) revenues increased 8% year over year to $387.9 million. The segment’s performance reflected contribution from an extra week as well as strong revenue growth in the Industrial & Consumer segment.

Within the segment, Telecom & Datacom (66% of Optical revenues) revenues inched up 1.9% year over year to $255.8 million.

Strong sales of indium phosphide-based coherent components and modules contributed to the segment’s performance in the quarter under review. Strength in adoption of ROADM products as well as EML chips in the cloud data center market also drove the top line.

Nevertheless, management added that continued delays in 5G fronthaul deployments in China negatively impacted quarterly performance.

Industrial & Consumer (34% of Optical revenues) revenues climbed 22% year over year to $132.1 million driven by uptick in adoption of c and 3D sensing solutions.

Laser segment (7.5% of net revenues) revenues fell 27.4% to $31.6 million due to coronavirus crisis-induced macroeconomic slowdown.

Operating Details

Non-GAAP total gross margin expanded 440 basis points (bps) from the year-ago quarter’s levels to 49.9% on improving product mix and reduced relative manufacturing costs.

Non-GAAP optical communication gross margin expanded 510 bps from the year-ago quarter’s figure to 50.1%, courtesy of favorable revenue mix and operational improvements.

Non-GAAP commercial laser gross margin contracted 250 bps from the year-ago quarter’s levels to 47.2% on lower revenues.

Non-GAAP operating expense expanded 150 bps to 22% in the reported quarter.

Non-GAAP operating margin expanded 290 bps from the year-ago quarter’s figure to 27.9% on account of gross margin expansion.

Non-GAAP research and development (R&D) expenses increased 15.8% year over year to $51.3 million. Non-GAAP selling, general and administrative expenses (SG&A) surged 6.3% year over year to $40.8 million.

Balance Sheet

As of Apr 3, 2021, the company had $2.055 billion in total cash and short-term investments compared with $1.7 billion as of December 26, 2020.

The company also announced a stock repurchase authorization up to $700 million to be executed over the next two years.

Guidance in Detail

For fourth-quarter fiscal 2021, net revenues are anticipated in the range of $360-$400 million. The Zacks Consensus Estimate for fourth-quarter revenues is currently pegged at $406.9 million.

Non-GAAP earnings for fiscal fourth quarter are expected between 92 cents to $1.14 per share. The Zacks Consensus Estimate is pegged at $1.27 per share.

Management anticipates Telecom & Datacom revenues to be up sequentially. However, Industrial & Consumer domain is expected to decline on a quarter-over-quarter basis due to seasonality.

Lumentum expects Commercial lasers revenues to improve sequentially on global recovery in served markets.

For fourth-quarter fiscal 2021, non-GAAP operating margin is anticipated in the range of 22.5-25%.

Zacks Rank & Stocks to Consider

Lumentum currently carries a Zacks Rank #3 (Hold).

Some other better-ranked stocks in the broader technology sector are Agilent Technologies A, Pure Storage PSTG and NVIDIA NVDA. All the stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

Agilent scheduled to report quarterly results on May 25, while NVIDIA and Pure Storage are slated to announce results on May 26.

Long-term earnings growth rate of Agilent, Pure Storage and NVIDIA is pegged at 9%, 52.2% and 15.2%, respectively.

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