Image source: Infinera.
Shares of Infinera (NASDAQ:INFN) moved sharply higher in late Tuesday trading, after the company reported its fifth consecutive quarter of better-than-expected results. Revenue growth also accelerated materially. Here's a closer look at the most crucial year-over-year figures:
| Metric | Q3 2015 Actuals | Q3 2014 Actuals | YOY Growth |
|---|---|---|---|
| Revenue | $232.47 million | $173.56 million | 33.9% |
| GAAP net income | $8.51 million | $4.84 million | 75.8% |
| Earnings per share | $0.06 | $0.04 | 50% |
| Cash from operations | $32.5 million | $22.3 million | 45.7% |
Data sources: S&P Capital IQ and Infinera press release.
Commenting on the results, CEO Tom Fallon said in a press release:
Our excellent third-quarter results reflect continued strength across our core business, including growing Cloud Xpress revenues as well as the initial contribution from the new metro business. Adding the recently announced metro core and long haul interconnect products along with Transmode's suite of metro solutions enables Infinera to further enhance the superior experience we deliver to our customers. As the most vertically integrated transport provider in the world, now armed with a broad end-to-end portfolio, Infinera is in a terrific position to continue to deliver differentiated financial results on both the top and bottom lines.
What went right: Revenue growth accelerated meaningfully from 22.2% in last year's third quarter. As Fallon points out, acquiring Transmode's metro business was a certain contributor to the gains but that's not necessarily a bad thing. Per-share earnings rose 50% on the basis of generally accepted accounting principles that account fully for acquisition costs.
What went wrong: Not much went wrong when you look at it. Cash from operations grew faster than revenue and gross margin was up slightly year over year (44.2% vs. 43.4% in last year's Q3). Meanwhile, Infinera is positioning itself to serve the entirety of the wavelength division multiplexing market by incorporating Transmode technology into a unified portfolio of products manageable from a single software interface.
What's next: Infinera didn't include guidance in its press release. Nevertheless, analysts tracked by S&P Capital IQ had the company generating $253.62 million in revenue and $0.19 a share in adjusted earnings. That compares with $186.31 million and $0.13 a share in last year's Q4. Longer term, analysts have Infinera growing earnings by an average of 18.75% annually during the next three to five years.
In the meantime, investors should focus on what management says about large-scale deals. Paying up for a unified portfolio only makes sense if there are customers willing to bet equally big on Infinera technology.
