FINISAR CORP Price and Consensus
This Zacks Rank #1 (Strong Buy) company is a provider of fiber optic subsystems and network test and monitoring systems which enable high-speed data communications over local area networks, or LANs, storage area networks, or SANs, and metropolitan access networks, or MANs. They are focused on the application of digital fiber optics to provide aline of high-performance, reliable, value-added optical subsystems for data networking and storage equipment manufacturers.
Recent Earnings
Finisar reported Q1 17 earnings in the early part of September where they beat both the Zacks Consensus Earnings and Revenue estimates for the second consecutive quarter (they have beaten the earnings estimates for four consecutive quarters). The company saw year over year gains in the following; Revenues +7.1%, Operating income +100%, Net income +83.2%, and operating margins increased from +4.4% to +8.3%. On a quarterly basis, the company saw gains in the following; Sales of telecom products +29%, Sales of Datacom products +0.2%, and GAAP gross margins rose to +31.7% from +28.4% last quarter.
Management’s Take
According to Jerry Rawls, CEO, “I am pleased to announce that Finisar achieved record revenues for our first quarter of $341.3 million, an increase of $22.5 million, or 7.1% compared to the prior quarter. This growth was primarily driven by strong demand for 100Gb/s transceivers in CFP, CFP2, CFP4, and QSFP28 form factors. In addition, demand for wavelength selective switches was strong. Our gross margins improved significantly due to favorable product mix and leverage of our vertically integrated manufacturing infrastructure over the larger volume. The combination of revenues being at the higher end of our guidance range and better than expected gross margins resulted in earnings per fully diluted share exceeding the upper end of our guidance range.”
Price and Earnings Consensus Graph
As you can see from the graph below, both earnings estimates, and the stock price have risen significantly in the second half of 2016.
Increasing Estimates
Due to the strong quarterly results and future growth expectations estimates for Q2 17, Q3 17, FY 17 and FY 18 have all seen significant upgrades over the past 30 days; Q2 17 improved from $0.21 to $0.38, Q3 17 rose from $0.21 to $0.38, FY 17 jumped up from $0.85 to $1.39, and FY 18 improved from $0.99 to $1.62.
Bottom Line
Over the past two quarters, revenues have more than doubled due a few reasons; China is in the middle stages of their 100G optical metro upgrade cycle with continued growth expected through 2017. North America is now in the beginning stages of their metro upgrade with companies like Verizon boosting their 100G capability. Lastly, Finisar has enhanced their product mix, and margins have steadily improved over the past two quarters.
Due to the strong quarterly results and future growth expectations estimates for Q2 17, Q3 17, FY 17 and FY 18 have all seen significant upgrades over the past 30 days; Q2 17 improved from $0.21 to $0.38, Q3 17 rose from $0.21 to $0.38, FY 17 jumped up from $0.85 to $1.39, and FY 18 improved from $0.99 to $1.62.
Bottom Line
Over the past two quarters, revenues have more than doubled due a few reasons; China is in the middle stages of their 100G optical metro upgrade cycle with continued growth expected through 2017. North America is now in the beginning stages of their metro upgrade with companies like Verizon boosting their 100G capability. Lastly, Finisar has enhanced their product mix, and margins have steadily improved over the past two quarters.
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