Optoelectronic components maker II-VI (NASDAQ:IIVI) reported results for the first quarter of the 2016 fiscal year on Tuesday morning. The company surged past its own earnings guidance and set strong targets for the upcoming quarter. II-VI shares rose as much as 7.6% on the news.

II-VI results: The raw numbers

 

Q1 2016 Actuals

Q1 2015 Actuals

Growth (YOY)

Revenue

$189.2 million

$185.8 million

2%

Net Income

$17.2 million

$12.3 million

40%

Diluted EPS

$0.27

$0.20

35%

Data source: SEC filings.

What happened with II-VI this quarter?
This company's business mix is always in a state of flux. To see what I mean, just take a look at the incoming orders versus collected revenues for II-VI's individual business segments.

  • II-VI's performance products delivered 17% higher order bookings compared to the year-ago quarter, led by orders from the military and life sciences markets. However, these orders will be filled later, and the performance products segment saw collected revenues decline by 7%.
  • The photonics division told exactly the opposite story, as incoming orders declined by 2% but billed sales rose by 13%. The largest customers for this segment come from the high-speed networking sector, ultimately serving end users in the telecom and data center industries.
  • The company is in the enviable position to benefit from a strong dollar. II-VI exceeded its own earnings guidance by $0.02 per share, pinning half of that surprise on favorable currency effects and the other half on a very profitable product mix.

II-VI offered guidance for the second quarter, which is currently underway.

  • Based on current business trends, and expecting currency exchange rates to stay somewhere near today's levels, second-quarter revenues should land near $186 million and earnings are expected at roughly $0.24 per diluted share.
  • Hitting these targets would work out to 5% year-over-year sales growth and a 20% boost to organic earnings.

What management had to say
According to President Chuck Mattera, II-VI is growing at the expense of other players in the optical components sector.

"Our optical communications group has done a great job of integrating the recently acquired businesses, increasing market share at key accounts, developing new products and gaining traction with new Web 2.0 customers," Mattera said in a conference call with analysts.

Furthermore, Mattera noted that a wave of broadband infrastructure investments in China is only just getting started: "We understand that the build out of broadband access in China is a national priority and we experienced a considerable increase in demand for our products to support it during the quarter," he said.

Iivi Highyag Laser


Lasers! Source: II-VI.

Looking ahead
Elsewhere, fiber materials giant Corning (NYSE:GLW) also reported strong quarterly results and surged more than 5% higher.

Against that backdrop, including rosy market commentary from II-VI's leadership and other players in the sector, it sure looks like we have a fiber-optic infrastructure investment surge on our hands.

However, many of Corning's and II-VI's competitors fell sharply on Tuesday instead. This is puzzling, especially since many of these stocks are already trading at rock-bottom valuation multiples. Corning qualifies as an interesting starting point for further investigation right now, even though that particular ticker actually surged.

Anders Bylund has no position in any stocks mentioned. The Motley Fool recommends Corning and II-VI. Try any of our Foolish newsletter services free for 30 days.

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