What happened

Shares of Oclaro Inc. (NASDAQ:OCLR) climbed 20.9% on Tuesday, after the optical communications specialist announced stronger-than-expected fiscal second-quarter 2018 earnings.

More specifically, Oclaro's quarterly revenue declined 9.5% year over year to $139.3 million, in line with the company's expectations. On the bottom line, that translated to adjusted earnings of $23.1 million, or $0.14 per diluted share. That's down from $36.3 million, or $0.21 per share, in the same year-ago period, but above the $0.12 per share investors were expecting. 

Fiber optic cables with blue and green lights shining through them


So what

Oclaro CEO Greg Dougherty noted that while revenue declined, the company enjoyed "strong" profitability and cash flow during the quarter.

"While we project March quarter revenue to be down sequentially, we anticipate another quarter of solid operating income," Dougherty added. "As the headwinds facing the industry begin to subside, and we ramp new products, our revenue is expected to resume growth in the June quarter."

Now what

For the quarter ending March 31, Oclaro expects revenue to be in the range of $120 million to $128 million, which technically stands below consensus estimates for sales of $132.8 million.

But it's also worth noting that shares of Oclaro had fallen nearly 40% over the past year leading up to this report. And it's no surprise to see the market so aggressively bidding shares up, with management calling for the optical industry to effectively turn for the better before the end of the first half of 2018. If that turn is effectively the start of a longer-term trend, today's gains could be just the beginning for patient Oclaro investors.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.