Q4 Preview: CIENA (CIEN) May Beat, But FY12 Headwinds Remain as Carriers Clip CapEx

CIENA Corp. (Nasdaq: CIEN) shares are doing the Macarena Wednesday heading into its fourth-quarter earnings report. The stock is up about 2 percent into the close.

Expected out before the market opens Thursday, the Street sees CIENA reporting earnings of 7 cents per share on revenue of $450.51 million. The number would be a swing into positive territory, from a loss of 18 cents per share reported in the same period last year.

Shares of CIENA fell nearly 15 percent through the quarter and have moved 12 percent lower since. The stock has traded within a range of $9.89 to $29.24 over the last 52-week time frame.

Last quarter, CIENA reported cash of $5.02 and a book value of $0.30 per share. Excluding cash, CIENA is going for 9.2x next year's earnings estimates, compared with 5.5x for Cisco (Nasdaq: CSCO).

Data from Bloomberg has 14 analysts with a Buy rating on CIENA, eight at Hold, and two with a Sell. The price target average is $17.70, with a low of $12.50 and high of $27.

Analyst Comments

• Wells Fargo is modeling for earnings of 6 cents per share on revenue of $450 million. The firm sees CIENA reporting relatively in-line results, but expects risk moving forward from "weak carrier spending and potential disruptions in the optical supply chain." Strength in the quarter will be driven by transport, and the inclusion of slipped deals which contributed to quarter-over-quarter weakness the last few periods. CIENA's switching and CESD business might show lighter sales compared with those in July.
  
  For fiscal 2012, the firm is modeling sales of $1.88 billion and earnings of 65 cents per share.
  
  
• Kaufman Bros. sees earnings of 12 cents per share and revenue of $451 million, and believes CIENA will beat those better-than-the-Street numbers. Kaufman thinks modeling for 43.5 percent margins might prove a bit too optimistic, with the revenue mix skewed more toward lower-margin transport and carrier Ethernet products. The firm commented, "Operating expense level improvements may prove to be more significant than our $175.9 million assumption, lending some upside to our operating margin
  of 4.5%."
  
  Kaufman points out positives are CIENA's pipeline of backhaul-related carrier Ethernet wins, growing 40G/100G system customers, and operational improvements. Negatives looking forward include core optical system demand weakening, and muted carrier CapEx for 2012.

Stay tuned to StreetInsider.com's EPS Insider section to see our analysis of the highly-anticipated quarterly results within seconds of their release. You can also check out CIENA's past performance at Streetinsider's CIENA's Income Statement.

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