(CIEN 30.71, +3.40, +12.45%)
is breaking out to a ten-year high after the optical networking company
reported upside third quarter results and guided fiscal fourth quarter revenue
above most estimates this morning.
Third quarter revenue accelerated to 12% growth, the highest level in eleven years. The company also guided next quarter sales above estimates for the second quarter in a row.
Management noted that orders exceeded revenue and the company is taking share as the market leader with a record backlog. Ciena is seeing broad-based demand with improving visibility.
is being driven by webscale (megacap technology) customers, where revenue grew
150% to reach a 20% mix, representing 3 of its top 10 customers. The
company is also seeing growth from international tier one telecommunications
service providers. Sales doubled in both India and Japan.
Last quarter, the company lowered margin guidance but raised its revenue outlook, citing more early, large contract wins, which carry a lower initial gross margin.
Management said it was increasingly focused on EPS as a key metric, in addition to top-line growth. The company spent half of its FCF during the quarter on share buybacks.
Management may update its three-year financial outlook (revenue up 5-7%, and adjusted EPS +15-16%) in December. Ciena has a $4.4 bln valuation and trades at ~25x EPS or ~18x next year's estimates which may move higher in response to this morning's results.