Ciena Shares Popped: What You Need to Know

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of communications equipment maker Ciena (Nasdaq: CIEN  ) soared more than 21% in early trading after reporting a smaller-than-expected loss. CEO Gary Smith also told Barron's that he believes European customers won't cut capital spending projects.

So what: Third-quarter revenue rose 12% to $435.3 million while adjusted profits improved to $0.08 a share. Analysts were expecting an $0.08 per share loss on $443.25 million in revenue. Operational improvements appear to be taking hold.

Now what: Indeed, in the Barron's interview, Smith said higher-margin gear such as switches comprised a greater portion of sales. The resulting improvement in gross margin trickled all the way down to the bottom line. Is this turnaround sustainable? You tell me. Please weigh in using the comments box below.

Interested in more info on Ciena? Add it to your watchlist.

Fool contributor Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team. He didn't own shares in any of the companies mentioned in this article at the time of publication. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Google+ or Twitter, where he goes by @milehighfool. You can also get his insights delivered directly to your RSS reader.

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  • Report this Comment On September 02, 2011, at 6:35 AM, iownie wrote:

    Although I like this stocks last round of beating its estimates, the substantial increase in its stock price was questionable. EPS compared to all of its competition remains on the downside and like most sector stocks in this uncertain economy, sustaining this level will be hard to do. I will buy under $14.

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