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Why Lumentum Holdings Shares Soared Today

By Evan Niu, CFA - Feb 6, 2018 at 12:59PM

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The 3D-sensing business is ramping up nicely.

What happened

Shares of Lumentum Holdings (LITE 2.58%) have soared today, up by 16% as of 12:10 p.m. EST, after the company reported strong fiscal second-quarter earnings. Guidance could have been a little better, but investors were happy with booming sales in the second quarter.

So what

Revenue in the fiscal second quarter came in at $404.6 million, easily crushing the Street's consensus estimate of $357.3 million. That translated into GAAP net income of $204.8 million, or $3.17 per share. On a non-GAAP basis, net income was $107.8 million, or $1.67 per share. Analysts were modeling for $1.14 per share in adjusted profit.

Woman using iPhone X on a beach

Image source: Apple.

"We achieved record revenue and profitability and exceeded our guidance for the second quarter driven by strong demand and execution in our 3D sensing, ROADM, industrial and telecom pump laser businesses. Our performance demonstrates the power of Lumentum's proprietary capabilities, which leverage many years of experience across multiple end markets," CEO Alan Lowe said in a statement. "Our proven capabilities position us well for the future as demand for our industrial lasers and ROADMs is strengthening, and 3D sensing opportunities are broadening to more customers and end markets."

Now what

Lumentum is one of the suppliers for Apple's (AAPL 4.08%) TrueDepth camera system that incorporates 3D-sensing capabilities. The company said that 3D-sensing revenue exceeded $200 million, as it has been aggressively ramping production. Last year, Lumentum had said it had $200 million in 3D-sensing bookings.

In terms of guidance for the fiscal third quarter, revenue is expected in the range of $280 million to $305 million, with adjusted earnings per share of $0.65 to $0.80. That top-line forecast is a little light compared to the $323 million in sales that analysts were expecting. Revenue from 3D sensing is expected to decline sequentially due to seasonality. Meanwhile, Apple reported earnings last week, with iPhone unit volumes falling shy of expectations.

While the outlook left a little to be desired, investors are likely feeling confident in the bigger picture, as Lumentum said 3D-sensing revenue in the second half of 2018 would more than double over the comparable period in 2017, suggesting the company will earn a lot of Apple's 3D-sensing business during the next product cycle.

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Lumentum Holdings Inc. Stock Quote
Lumentum Holdings Inc.
$87.99 (2.58%) $2.21
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