Telecom investors are a patient lot. They have to be -- or at least they should be -- because to date, the industry's revival has spent an awful lot of time hiding "just around the corner." So far, we've only just occasionally seen the revival peek out from the other side. Today, let's take the initiative and peer around the corner to see what might be shaping up at JDSU (NASDAQ:JDSU), which reports its fiscal Q2 2006 numbers tomorrow afternoon.

Wall Street Wisdom:

  • General consensus. 15 analysts follow JDSU. Perhaps "follow" is overstating it -- mostly, they sit around with the rest of us and watch the company sit on its hands. They also, by and large, counsel investors to do the same: 10 analysts say "hold," with the rest of the votes split pretty evenly between "buy" and "sell."
  • Revenues. Just as we saw last quarter, revenues are expected to spike 73% this year in comparison to last -- up to about $313 million as a result of the firm's acquiring Acterna in May of last year. That estimate is toward the low end of the company's own predicted revenues of two months ago.
  • Earnings. Unlike last quarter, JDS is expected to stop losing money this quarter. Analyst estimates put the firm's per-share profits at breakeven for fiscal Q2 2006. No word on whether that's "pro forma" breakeven or really breakeven, though.

Margin watch:
JDSU's margins have been a train wreck for some time. Even if you ignore the ugly negatives found in the operating and net margin lines, the gross margin picture isn't particularly attractive, either. Its long-term slide suggests that JDSU suffers either from intense price competition, or rising raw materials costs that it's unable to pass on to customers.

Margins %

6/04

9/04

12/04

3/05

6/05

9/05

Gross

28.1

28.3

26.3

25.4

22.5

22.7

Op.

(13.5)

(10.3)

(11.6)

(11.8)

(15.4)

(18.3)

Net

(18.2)

(18.1)

(14.9)

(19.2)

(36.7)

(37.7)
All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ending in the named months.

Foolish lookout:
After reviewing the company's balance sheet from last quarter, I'm pretty sure that JDSU lacks pricing power, too. Sales rose 33% year over year, but accounts receivable grew 66%. This suggests that JDSU is not in any position to demand prompt payment from its customers. The only good news I see is that inventories rose a bit more slowly -- up only 30%. So at least inventory growth remains in check. Let's hope tomorrow's report contains more news of that sort.

Fool contributor Rich Smith has no position, long or short, in JDSU.