Ciena Sinks On Q1 Sales Miss, Dragging Fiber Optics Stocks Down
Fiber optic network and switch designer Ciena ( CIEN ) issued fiscal Q1 earnings early Thursday that beat Wall Street consensus, but its sales missed lowered estimates, as did its sales outlook, and shares plunged to a 15-month low. “Macro strikes again,” Nomura analyst Jeffrey Kvaal said in a research note after the earnings release, citing “recent volatility in the macro environment,” notably weak spending in European, Middle Eastern and African markets. Ciena stock was down 19%, below 17, in early afternoon trading in the stock market today . Shares are more than 35% off a two-year high of 26.50 touched last July. Ciena designs ethernet transport/switching systems used in network infrastructure by telecom and cable service providers. Infinera ( INFN ), Finisar ( FNSR ) and sector giant Cisco Systems ( CSCO ) work in similar or related spaces. Ciena dragged its entire IBD Telecom-Fiber Optics industry group down 4% by early afternoon, with Infinera down 8%. Finisar stock was down 1% and Cisco down a fraction Thursday afternoon. In December, Ciena had guided to revenue of $555 million to $590 million for its fiscal first quarter ended Jan. 31. It didn’t give EPS guidance. At the time, analysts had modeled EPS ex items of 28 cents on revenue of $638 million, but analysts polled by Thomson Reuters subsequently lowered their estimates to 14 cents and $576.3 million. So while Ciena beat on EPS, reporting 18 cents ex items, it beat only the scaled-back expectations, while Q1 revenue of $573.1 million missed even Wall Street’s revised estimate. Analysts expect the current Q2 ending in April to produce 31 cents per share ex items on revenue of $643.4 million, but Ciena forecast $630 million at the midpoint of its guidance range. Ciena guided Q2 gross margins to the mid-40s percentile, with analyst consensus at 44.9%, while operating expenditures of about $225 million “implies (an) operating margin of about 9.3% vs. consensus of 10.3%,” said Nomura’s Kvaal. “Despite some recent volatility in the broader macroeconomic environment, the demand drivers for our business remain firmly in place, and we are well positioned to translate our market leadership into continued growth and profitability this fiscal year,” Ciena CEO Gary Smith said in the earnings release.