Is the Ciena Earnings Rebound for Real?

Ciena (NYSE: CIEN  ) will release its quarterly report on Wednesday, and investors are hoping that the company can make it three quarters in a row of positive adjusted net income. As Ciena earnings have recovered, the stock's valuation has looked a lot more reasonable, even though the company still has a long way to go before it can declare its turnaround complete.

Ciena relies on the health of the market for high-speed networking, with its products helping customers create network infrastructure that optimizes the flow of data and information across their IT platforms. Spending in that area has been muted in recent years, but with signs of a comeback in IT spending, investors are hopeful that the result will be greater sales and profits for Ciena and its peers. Let's take an early look at what's been happening with Ciena over the past quarter and what we're likely to see in its report.

Stats on Ciena

Analyst EPS Estimate

$0.16

Year-Ago EPS

($0.04)

Revenue Estimate

$532.28 million

Change From Year-Ago Revenue

12.3%

Earnings Beats in Past 4 Quarters

2

Source: Yahoo! Finance.

Will Ciena earnings stay positive?
Analysts have gotten much more optimistic in recent months about Ciena earnings, boosting their July quarter projections by a nickel per share and their full fiscal-year estimates by double that amount. The stock has climbed almost 20% just since late May.

Ciena started the quarter off on the right foot, announcing in early June an unexpected adjusted net profit in its April quarter. Even though JDS Uniphase (NASDAQ: JDSU  ) and NeoPhotonics (NYSE: NPTN  ) both soared in sympathy, Ciena CEO Gary Smith made the argument that his company should benefit more from a general rise in network-infrastructure building than its peers. Given that neither JDS Uniphase nor NeoPhotonics have reported particularly good results before or since the Ciena report, it's possible that Ciena has found a secret to success that its counterparts simply haven't.

Still, Ciena isn't the only company in the space having success. Finisar (NASDAQ: FNSR  ) managed to post equally impressive results and posted further gains after guiding preliminary July quarter revenue and earnings estimates higher. The Ethernet side of Finisar's business has provided particular strength to the company overall, potentially pointing the way toward the direction Ciena should follow as well.

The key to Ciena's growth, though, will be the speed with which customers build out new networks. In late July, the Southern Cross Cable Network completed the implementation of Ciena 100G technology in its high-speed broadband network serving Australia and New Zealand. As demand rises around the world, Ciena needs to get its share of similar wins in order to keep growing.

In the Ciena earnings report, watch to see whether the company can keep posting outpaced growth compared to some of its peers. Another positive result could confirm that Ciena's strategy is giving it a competitive advantage over rival networking companies.

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