Ciena (CIEN) Missed Q2 Earnings Estimates, Revenue Up Year-over-Year – June 3, 2022

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Ciena Corporation (CIEN Free Report) announced lackluster results for the second quarter of fiscal 2022 (ended April 30, 2022), with adjusted earnings of 50 cents per share missing Zacks’ consensus estimate of 7.4% and falling 19.4% year-on-year.

Quarterly total revenue increased 13.8% year over year to $949.2 million, driven by 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 customer over 10%, contributing 11% of total revenue in the second quarter of fiscal 2022. Ciena’s non-telecom revenue (44% of total revenue) increased 15% from a year-over-year in the second quarter of the fiscal year.

Regionally, revenue in the Americas was $700.8 million, up 19.3% year-over-year. Revenue in Europe, the Middle East and Africa was $145.1 million, down 6.4% from year-ago quarter levels. Revenue in the Asia Pacific region totaled $103.3 million, up 13% from the prior year quarter.

The Hanover, Maryland-based network systems and services company’s stock price fell 1.3% on June 2, closing the session at $50.68. However, the shares are up 0.5% in premarket trading. Over the past year, stocks have lost 13.2% of their value against a 13% drop in the industry.

Sector results

Total networking platform revenue increased 15.3% year-over-year to $734.5 million. However, the reported figure beat the consensus mark of $722 million.

Platform software and services revenue totaled $69.1 million, up 21.9% from year-ago quarter levels. The reported figure missed the consensus mark of $76 million.

Blue Planet Automation software and services revenue decreased 29.3% to $16.9 million. The reported figure missed the consensus mark of $23.2 million.

Total Global Services revenue was $128.7 million, up 11% year-over-year, but below consensus of $133 million.

Other details

Adjusted non-GAAP gross margin was 43% versus 49.2% in the prior year quarter, significantly impacted by higher component costs and logistics expenses. Adjusted operating expenses were $301.1 million, up 8% from the year-ago quarter.

Adjusted non-GAAP operating margin was 11.3% compared to 15.8% in the prior year quarter. Non-GAAP adjusted EBITDA decreased 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 under the billion-dollar share buyback program. Ciena also received 0.9 million shares related to the final settlement of the accelerated stock repurchase program during the current quarter.

Cash flow and liquidity

In the second fiscal quarter, Ciena’s net cash from operating activities was $106 million, compared to $225 million in the prior year quarter.

As of April 30, 2022, the company had $1,019.8 million in cash and cash equivalents and $1,062.2 million in long-term net debt, compared to $1,118.6 million and $1,065. $2 million a year ago.

Tips

For the third fiscal quarter, the company expects revenue of $870 million to $930 million. The adjusted gross margin is estimated in the low range of 40%. Adjusted operating expenses are estimated between $305 and $310 million.

For fiscal 2022, the company now expects revenue growth to be in the mid-single digits from the previously forecast range of 11-13%. The reduced outlook is driven by uncertainty stemming from supply chain issues. Adjusted Gross Margin is estimated in the low 40% range compared to prior guidance of 43-46%.

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

Zacks Ranking and Other Stocks to Consider

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

A few higher-ranked stocks from the broader tech sector worth considering are InterDigital (IDCC Free report) Avnet (AVT free report) and Flex (FLEX free report). InterDigital and Avnet sport a Zacks rank #1 (strong buy), while Flex wears a Zacks rank #2 (buy). You can see the full list of today’s Zacks #1 Rank stocks here.

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

Flex’s earnings have exceeded Zacks’ consensus estimate for the past four quarters, averaging 21.1%. Shares of FLEX are down 8.8% over the past year.
The Zacks consensus estimate for InterDigital 2022 earnings is pegged at $3.28 per share, up 5.1% over the past 60 days. IDCC’s long-term earnings growth rate is set at 15%.

InterDigital’s earnings have exceeded the Zacks consensus estimate in the previous four quarters, averaging 141.1%. IDCC shares have lost 20.9% of their value over the past year.

Zacks’ consensus estimate for Avnet’s fiscal 2022 earnings is pegged at $6.83 per share, up 20.5% over the past 60 days. The long-term earnings growth rate is expected to be 37.2%.

Avnet’s earnings have exceeded the Zacks consensus estimate for the past four quarters, averaging 21.22%. Avnet shares have risen 11.3% over the past year.

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