JDS Uniphase Corp.(JDSU) declared third quarter 2011 financial result yesterday after the closing bell. The company, which manufactures broadband and optical networking components for the telecom industry, reported strong third quarter revenue, gross margin and operating margin surpassing its previous high levels.
Moreover, the company forecasted encouraging revenue guidance for the ensuing fourth quarter of 2011. As a result, in the after-market trade on NASDAQ, shares of JDS Uniphase increased by $1.85 (9.25%) to $21.85.
Quarterly net revenue was $454 million, up 36.6% year over year and was significantly above the Zacks Consensus Estimate of $449 million on the back of higher Communications and Commercial Optical Products revenue and Communications Test and Measurement revenue.
On a GAAP basis, quarterly net income was $38.6 million or 16 cents per share compared with a net loss of $11.9 million or a loss of 5 cents per share in the year-ago quarter. However, quarterly adjusted (excluding special items) earnings per share (EPS) of 17 cents missed the Zacks Consensus Estimate by a penny.
Gross margin in the reported quarter was 44.0% compared with 39.7% in the year-ago quarter. In the same quarter, operating expenses were $187.1 million, up 31.3% from the prior-year quarter. However, operating income increased to $12.6 million from an operating loss of $10.6 million. EBITDA in the third quarter of 2011 was $51.5 million compared with $21.5 million in the prior-year quarter.
At the end of the third quarter of 2011, JDS Uniphase had $664.5 million of cash & marketable securities and $281.1 million of outstanding debt on its balance sheet compared with $567.6 million of cash & marketable securities and $267.1 million of outstanding debt at the end of fiscal 2010.
At the end of the third quarter of 2011, debt-to-capitalization ratio was 0.21 compared with 0.23 at the end of 2010. JDS Uniphase generated $52.9 million of cash from operations in the reported quarter.
Revenue Segments
In the third quarter of 2011, Communications Test and Measurement segment reported revenue of $189.2 million, up 29.9% year over year. Communications and Commercial Optical Products segment revenue surged 62.8% year over year to $209.4 million. Within the segment, Optical Communications revenue was $184.7 million, up 68.1% from the prior-year quarter and Commercial Lasers business revenue was $24.7 million, up 31.9% from the prior-year quarter. Advanced Optical Technologies segment generated revenue of $56.8 million, down 3.1% year over year.
Geographic Segments
In the third quarter of 2011, the Americas accounted for 46% of the total revenue, while Europe and Asia-Pacific accounted for 28% and 26%, respectively.
Future Financial Outlook
For the fourth quarter of 2011, management expects non-GAAP revenue in the range of $455 million–$475 million.
Recommendation
Despite highly cyclical nature of the Optical component industry and strong competition from companies like Avago Technologies Limited (AVGO) and Finisar Corporation (FNSR), we remain highly optimistic regarding the success of the company’s product portfolio targeting next-generation technologies of IPTV, wireless backhaul, 4G LTE networks, and 40 Gbps and 100 Gbps optical network systems. Management is also executing well regarding cost control and cash preservation.
We thus maintain our long-term Neutral recommendation for JDS Uniphase. Currently, JDS Uniphase has a Zacks #3 Rank, implying a short-term Hold rating on the stock.
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