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Why Ciena (CIEN) Missed Revenue Plunging Shares

Stocks in this article: CIEN

NEW YORK (TheStreet) -- Ciena (CIEN) reported adjusted earnings of 16 cents for its fourth-quarter earnings report, missing the Capital IQ Consensus of 24 cents by $0.08. Shares were losing 7.8% to $21.11.

Ciena reported revenues of $583.4 million, a 25% percent increase year-over-year and higher than the $568.51 million consensus. Ciena's guidance for the first quarter calls for revenue $515 million and $545 million compared to the Capital IQ Consensus of $537.66 million. The guidance also includes adjusted (non-GAAP) gross margin percentage in the low-40s and adjusted (non-GAAP) operating expenses of about $205 million.

Despite the missed earnings and conservative guidance, Jim Cramer and Stephanie Link bought 2,000 more shares of the company for Jim's charitable trust portfolio telling their Action Alerts PLUS subscribers: "We like the long-term story of CIEN, its market share growth in optical and its new products and strong trends in the upgrade cycle from the service providers and cable companies."

"We see the reaction as overdone, especially on a blowout revenue number and record backlog," Cramer and Link write. "Fiscal 4Q earnings missed consensus by 8 cents a share and came in at 16 cents a share. Revenues rose 8.4% q/q and 25.3% y/y and easily beat consensus at $583.4 million."

"This performance validates the strategic market differentiation we've established with our OPn architecture, our unique approach to customer engagement, and our continued technology innovation," the company's press release states. "These differentiators will help us continue to grow revenue and increase operating leverage in 2014."

Ciena also announced that it will transfer its stock listing from the NASDAQ Stock Market (:NASDAQ) to the New York Stock Exchange (:NYSE). The company should begin trading on the NYSE on Dec. 23 under its current CIEN ticker symbol.

TheStreet Ratings team rates CIENA CORP as a Hold with a ratings score of C-. TheStreet Ratings Team has this to say about their recommendation:

"We rate CIENA CORP (CIEN) a HOLD. The primary factors that have impacted our rating are mixed ? some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its solid stock price performance, growth in earnings per share and increase in net income. However, as a counter to these strengths, we find that the company's profit margins have been poor overall."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Powered by its strong earnings growth of 96.66% and other important driving factors, this stock has surged by 55.17% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
  • CIENA CORP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, CIENA CORP continued to lose money by earning -$1.46 versus -$2.06 in the prior year. This year, the market expects an improvement in earnings ($0.62 versus -$1.46).
  • Net operating cash flow has significantly increased by 81.44% to $42.00 million when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 50.37%.
  • 45.95% is the gross profit margin for CIENA CORP which we consider to be strong. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of -0.22% is in-line with the industry average.

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