Oplink Communications Earnings Preview

After beating estimates last quarter by $0.04, Oplink Communications (Nasdaq: OPLK  ) has set the standard for itself. The company will unveil its latest earnings on Thursday, Oct. 27. Oplink Communications provides design, integration, and optical manufacturing solutions for optical networking components and subsystems. Its products are designed to increase the bandwidth capacity of fiber-optic networks.

What analysts say:

• Buy, sell, or hold?: Analysts strongly back Oplink Communications, with three of four rating it a buy and the remainder rating it a hold. Analysts like Oplink Communications better than competitor Oclaro overall. Oplink Communications' rating hasn't changed over the past three months.
• Revenue Forecasts: On average, analysts predict $43 million in revenue this quarter. That would represent a decline of 13.3% from the year-ago quarter.
• Wall Street Earnings Expectations: The average analyst estimate is earnings of $0.06 per share. Estimates range from $0.05 to $0.08.

What our community says:
CAPS All-Stars are solidly behind the stock, with 87% giving it an "outperform" rating. The community at large concurs with the All-Stars, with 88.7% awarding it a rating of "outperform." Fools are bullish on Oplink Communications, though the message boards have been quiet lately with only 75 posts in the past 30 days. Despite the majority sentiment in favor of Oplink Communications, the stock has a middling CAPS rating of three out of five stars.

Management:
Oplink Communications' profit has risen year over year by an average of more than fourfold over the past five quarters. The company boosted its gross margin by three percentage points in the last quarter. Revenue rose 12.3% while cost of sales rose 7.5% to $28.5 million from a year earlier.

Now let's look at how efficient management is at running the business. Traditionally, margins represent the efficiency with which companies capture portions of sales dollars. The following table shows gross, operating, and net margins over the past four quarters. 

Quarter	Q4	Q3	Q2	Q1
Gross Margin	34.7%	36.1%	36.7%	32.5%
Operating Margin	7.4%	16.1%	17.6%	12.9%
Net Margin	60.1%	15.3%	16.3%	11.2%

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