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Oclaro Explodes Higher On China Metro Upgrades

Posted by on May 22, 2017 8:18 PM
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Categories: Stocks

May 22, 2017: Optical stocks like Oclaro exploded higher today following positive commentary regarding metro upgrades coming out of China.

May 2, 2017: Oclaro reports Q3 EPS of $0.23 versus the $0.20 estimate. Revenue also beat coming in at $162.2 million versus the $157 million estimate.

The CEO Greg Dougherty said, “I am very pleased with our outstanding financial performance for the third quarter. We posted record results, which included revenue growth and improved gross margin during what is normally a seasonally weak period. Our revenue increased 60 percent over the same period one year ago, driven by our 100G and beyond products. We also achieved further customer and regional diversification, driven by sales growth in North America and Europe. This strong revenue performance resulted in record non-GAAP gross margin of 42 percent and non-GAAP operating income of $40 million. These outstanding results further demonstrate the strength of our products, customer mix and operational improvements. During April, we saw a significant slowing of demand in China which, coupled with an acceleration of the product transition from 100G CFP related products to the QSFP platform, will cause us to see an approximate 10 percent sequential decrease in our revenue in the June quarter. Despite lower revenue, we currently anticipate that our non-GAAP gross margin should remain around 40 percent as we maintain healthy profitability, further attesting to the strength of our financial model. We believe that the industry fundamentals, which drive the need for increased bandwidth and fiber optic components, remain intact and anticipate returning to revenue growth in the September quarter.”

January 31, 2017: Oclaro reports Q2 EPS of $0.21 versus the $0.19 estimate. Revenue also beat coming in at $154 million versus the $153 million estimate.

The CEO Greg Dougherty said, “Our December quarter was very strong with improvement in all our financial metrics. Revenue increased 14 percent from the first quarter of fiscal 2017, and 64 percent from the same quarter last year, with demand for our newer 100G and beyond products driving this excellent growth. In addition, we had record gross margin and operating income resulting from higher revenue, a richer product mix, and favorable foreign exchange rates. We currently forecast revenue to increase again in the March quarter, driven by healthy demand across the multiple markets we serve.”

January 16, 2017: Hot stock tip sent in from the GuerillaStockTrading website on Oclaro. The catalyst is that earnings on January 31, 2017, will beat estimates. Thank you for sending in this hot stock tip.

Back on December 21, 2016, Cowen reiterates an Outperform rating and set a price target of $13. Also on December 21, 2016, pre-market strength was attributed to positive comments by Louis Navellier on CNBC. On December 16, 2016, Stifel made positive comments about Oclaro.

These positive comments from analysts are just circumstantial evidence that Oclaro could beat when they report earnings on January 31, 2017. For more substantial evidence of the possibility of an earnings surprise, let’s look at the recent history of earnings reports from Oclaro.

Earnings Surprise Winning Streak

Oclaro is on an incredible positive earnings surprise winning streak according to the folks at Zack’s research. For the last seven earnings reports, Oclara has beat EPS estimates:

February 3, 2015 = EPS surprise by 25%
May 5, 2015 = EPS surprise by 56.25%
November 3, 2015 = EPS surprise by 25%
February 2, 2016 = EPS surprise by 100%
May 3, 2016 = EPS surprise by 200%
August 2, 2016 = EPS surprise by 80%
November 1, 2016 = EPS surprise by 20%

Oclaro Stock Chart

The Finviz screener settings used to find Oclaro are: Forward P/E Low (<15), EPS growth this year 115% – 120%, EPS growth qtr over qtr 175% – 180%, Sales growth qtr over qtr 50% – 55%, Institutional Transactions Over +5%

Oclaro, Inc. is a leader in optical components, modules, and subsystems for optical transport and metro networks, enterprise networks, and data centers. Leveraging more than three decades of innovation in laser technology, photonic integration, and transceiver/subsystem design, Oclaro’s solutions are at the heart of the fast optical networks and high-speed interconnects that are enabling the next wave of streaming video, cloud computing, voice over IP and other high-speed and bandwidth-intensive applications.

Oclaro’s products leverage photonics technologies to transmit, amplify, regenerate and receive data across fiber optic networks. These products enable Oclaro’s telecommunications and data communications customers to increase network bandwidth, reduce latency, and offer new services to their customers flexibly and cost effectively.


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Lance Jepsen

For ethical purposes, I try not to hold any position in any stock I profile on unless specifically stated in the article. Owner of Seasoned entrepreneur, investor, and writer. I love God, family, country, stock trading, economics, and helping people learn how to trade.
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