Lumentum (LITE +11%) is trading higher after reporting a massive second quarter beat and guiding third quarter results below consensus.
Lumentum is a manufacturer of optical and photonic products enabling optical networking and commercial laser customers worldwide. Lumentum's commercial lasers enable advanced manufacturing techniques and diverse applications including next-generation 3D sensing capabilities. Lumentum is the key supplier for 3D sensing (3DS) components for Apple's iPhone X, which enables the Face ID.
Lumentum reported second quarter adjusted earnings of $1.67/share on revenue of $404.6 million (+53%). The company had guided for second quarter earnings of $1.05-1.25 on revenue of $345-375 million.
Chief executive Allen Lowe: "We achieved record revenue and profitability and exceeded our guidance for the second quarter driven by strong demand and execution in our 3D sensing, ROADM, industrial and telecom pump laser businesses.. Our proven capabilities position us well for the future as demand for our industrial lasers and ROADMs is strengthening, and 3D sensing opportunities are broadening to more customers and end markets."
However, like most Apple suppliers, Lumentum guided March quarter results below consensus.
On the call, management said there is clear momentum in 3D sensing, but the first half of the year is a seasonally slow period for the consumer end market. Management said it won some business on an android device but will be building inventory in the first half of the calendar year for the seasonal ramp and acceleration of demand in back half of the year.
Lumentum said the 3D sensing market is accelerating and will be a $1 billion annual market in the next year or two. Management said 3DS market unit volume should more than double this year.
When asked about the timing for auto adoption of 3DS, management said that end market won't see meaningful revenue until 2020.
Other 3D sensing players include II-VI (IIVI +2%) and Finisar (FNSR +6%).
Fellow optical stocks Fabrinet (FN +26%) and Oclaro (OCLR +19%) are also higher after both company's beat quarterly estimates but guided down the next quarter. The group is eagerly awaiting a recovery in demand from China, which still appears to be a couple of quarters away.