With shares down over 21% for the year to date, investors are still punishing the stock after management issued worst-than-expected guidance back in March.
The company specializes in broadband, data networking and optical equipment services. Ciena's main customers include, among others, Verizon (VZ) and AT&T (T). These are, without a doubt, strong names. The problem, however, is Ciena relies a bit too much on their capital investments.
Over the past couple of years, the entire telecom sector has spent very little to upgrade its infrastructure, which has also impacted upon rivals such as Cisco (CSCO) and Juniper Networks (JNPR). There have been some modest spending improvements in the U.S., but it hasn't been nearly enough to offset weakness in other parts of the world.
Thursday, the Street will be looking for stronger signs of progress. Ciena is expected to post 13 cents in earnings per share on revenue of $559.18 million. The company has performed well over the past several quarters. Management has delivered an earnings beat in three of the past four reporting periods, including beating adjusted earnings in the March quarter by 116%.
That, however, hasn't stopped analysts from cutting estimates for this current quarter. To offset the revenue headwinds, Ciena has been working to improve its operational efficiency, which has resulted in a better-than-expected rise in cash flow.