Oclaro's Ugly Outlook Casts Shadow

Oclaro was hit with a spate of order pushouts and cancellations in mid-September, and the whole optical networking sector felt the pain on Thursday.
Publish date:

Updated with added information about Oplink's results.



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(OCLR) - Get Report

was hit with a spate of order pushouts and cancellations in mid-September, and the whole optical networking sector felt the pain on Thursday.

The San Jose, Calif.-based Oclaro is a smaller player but the depth of its miss in its fiscal first-quarter ended Sept. 30 as well as its below-consensus outlook for the December period still took a heavy toll on the group.

In addition to Oclaro's plus-37% drop,

JDS Uniphase


, which was downgraded by RBC Capital, fell 11.4% to close at $10.24;


(FNSR) - Get Report

lost 6.5% to $16.86;


(CIEN) - Get Report

fell 3.1% to $13.32; and

Oplink Communications


, which was downgraded along with Oclaro by BWS Financial, tumbled 15.2% to $15.25.

"Overall demand drivers remain, yet we believe the overall trend of book-to-bill in this

optical component segment may be decreasing from a month-to-month point of view," said RBC Capital in its note detailing the downgrade of JDS Uniphase to market perform from sector perform. "Oclaro's revenue miss may accentuate this point."

The firm also cut its 12-month price target on JDS Uniphase's stock to $13 from $16 and trimmed earnings expectations for other companies in the group.

BWS Financial lowered its rating on Oclaro to sell following the company's poor outlook and set a 12-month target price of $6.50 on the stock, implying further downside of more than 25%.

"Demand trends have changed significantly as telecom customers are delaying some capital expenditure programs, which is leading to communications equipment manufacturers' reliance on finished inventory," said the firm said in its note, adding later: "We would expect the group to see further selling pressure as peers release earnings reports showing increased inventory levels and pushed out customer purchasing trends."

For Oplink, BWS Financial went to hold with a 12-month target price of 414, wisely reserving some judgment as the company had yet to report its quarterly results. After Thursday's closing bell, Oplink posted a profit of 41 cents a share for its fiscal first-quarter ended in September with revenue totaling $49.6 million. That performance bested Wall Street's consensus view for earnings of 39 cents a share in the quarter on revenue of $48.7 million.

Oplink noted that "near-term visibility remains limited" in its press release but forecast non-GAAP earnings of 41 to 47 cents a share for the December quarter on revenue of between $50 million and $53 million, an outlook that surrounds the current average analysts' estimate for a profit of 42 cents a share on revenue of $51.1 million.

The stock regained some of the ground it lost in the regular session in extended trades, rising 7.2% to $16.35 on volume of almost 55,000, according to




Written by Michael Baron in New York.

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