After beating earnings estimates for most of last year, Ciena
What analysts say:
- Buy, sell, or waffle? Twenty-one analysts still color Ciena's outlook. Ten say to buy it, and 11 vote hold.
- Revenue. On average, they're looking for 37% sales growth to $225.6 million.
- Earnings. Pro forma profits are expected to nearly double to $0.40 per share.
What management says:
Let's see here ... over the past quarter, Ciena has settled a lawsuit with Northrop Grumman
Back on the plus side, AT&T announced this morning that it will spend $1 billion to upgrade its network this year. Assuming Cisco doesn't eat the whole pie, that should leave a piece of extra business for Ciena to gnaw on. And if this sets off an arms race among Verizon
What management does:
Now take all the extra revenue, and magnify it with the strong growth in margins we see below, and you've got a formula for superb earnings growth over the course of this year.
7/06 |
10/06 |
1/07 |
4/07 |
7/07 |
10/07 |
|
---|---|---|---|---|---|---|
Gross |
44.5% |
45.7% |
46.2% |
44.7% |
45.0% |
46.5% |
Operating |
(10.5%) |
(3.8%) |
(0.0%) |
1.7% |
3.5% |
5.6% |
Net |
(50.8%) |
0.1% |
2.9% |
4.9% |
9.0% |
10.6% |
One Fool says:
Now, don't assume that all this good news is going to lift Ciena's stock price. It certainly could, but the company is already trading for a pretty rich multiple of 30 times trailing earnings (versus 20% projected long-term profits growth). And while Ciena's free cash flow is growing strongly, it still hasn't quite caught up with the number quoted as net earnings under GAAP.
To reach an attractive valuation, Ciena's going to need to place strongly in the pie-eating contest described above, and build on its trend of ever-expanding margins. Tune in next week, when fellow Fool Anders Bylund takes a look at Ciena's progress on these two fronts.
What did we expect out of Ciena last quarter, and what did we get? Find out in: