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Finisar (FNSR) Surpasses Q1 Earnings and Revenue Estimates

Zacks

Finisar Corporation FNSR reported healthy first-quarter fiscal 2019 results (ended Jul 29, 2018), wherein both the top line and the bottom line beat the respective Zacks Consensus Estimate.

Net Loss

On a GAAP basis, net loss for the reported quarter was $18.5 million or loss of 16 cents per share against net income of $19.9 million or 17 cents per share in the year-ago quarter. This was primarily due to lower revenues and higher total operating expenses.

Excluding non-recurring items, non-GAAP net income declined to $21.3 million or 18 cents per share from $45.8 million or 40 cents per share in the prior-year quarter. Non-GAAP earnings per share, however, beat the Zacks Consensus Estimate by 6 cents.

Finisar Corporation Price, Consensus and EPS Surprise

Revenues

Quarterly overall revenues decreased 7.2% year over year to $317.3 million primarily due to lower datacom revenues. The top line, however, surpassed the Zacks Consensus Estimate of $316 million.

Revenues from datacom and sensing products were $238.1 million, witnessing lower demand for 40-gig transceivers. Sales of telecom products were $78.2 million, recording a rise in demand for wavelength selective switches driven by carrier deployments in India and China.

Other Quarter Details

Cost of revenues was $236.2 million compared with $225.9 million in the year-ago quarter. In the fiscal first quarter, gross profit was $80.7 million compared with $115.3 million in the year-ago quarter with margin of 25.4% and 33.7%, respectively. Finisar reported an operating loss of $15.7 million against an income of $29.9 million in the prior-year quarter.

In the fiscal first quarter, the company’s capital expenditures were approximately $112.7 million of which approximately $4 million was related to the construction of the third building of Wuxi manufacturing site and approximately $97 million related to the uplift of the building in Sherman, TX and delivery of capital equipment for that site.

Liquidity

As of Jul 29, 2018, Finisar had $326.2 million of cash and cash equivalents with $505.7 million of total long-term liabilities.

Fiscal Q2 Outlook

Finisar expects revenues between $315 million and $335 million in the second quarter of fiscal 2019. It anticipates non-GAAP gross margin to be approximately 28% and non-GAAP operating margin to be around 7-8%. Non-GAAP earnings per share are expected to be in the range of approximately 19-25 cents.

For the fiscal second quarter, for the Sherman facility, the company expects approximately $35 million in capital expenditures for the uplift of the building and additional equipment. It also expects an additional $28 million in other capital expenditures, including $3 million related to the construction and fit out of the third Wuxi building.

Zacks Rank & Stocks to Consider

Finisar currently has a Zacks Rank #3 (Hold). Better-ranked stocks in the broader industry include Ciena Corporation CIEN, United States Cellular Corporation USM and AT&T Inc. T, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Ciena has a long-term earnings growth expectation of 15.3%. It surpassed earnings estimates twice in the trailing four quarters with an average positive surprise of 7.7%.

United States Cellular has a long-term earnings growth expectation of 1%. It surpassed earnings estimates thrice in the trailing four quarters with an average positive surprise of 303.6%.

AT&T has a long-term earnings growth expectation of 3.6%. It surpassed earnings estimates twice in the trailing four quarters with an average positive surprise of 5.9%.

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