Q1 Preview: Ciena (CIEN) Should Benefit from Strong Product Cycle Momentum

Ciena Corp. (Nasdaq: CIEN) is higher today, ahead of the company's first quarter earnings report, expected out after the market closes Monday, March 7th. Shares are up just 0.17% this afternoon.

CIEN is expected to report a loss of $0.16 per share on revs of $421.93 million. For Q410, the Linthicum, MD-based communications networking company posted a loss of $0.18 on revs of $417.6 million, both topping analyst estimates. Looking back at Q110, we see that Ciena produced an adjusted loss of $0.09 with revs of $167.4 million, wider than expectations.

Shares gained nearly 62% through the quarter, to $22.03 at the end of January. The stock is up 30% since then, and finished 2010 about 91% better.

Data from Bloomberg has 15 analysts with a Buy on CIEN, 6 with a hold, and five suggesting to Sell. The analyst price target average is $28.12, with a high of $37 and low of $13. Shares have traded in a range of $29.24 - $11.86 over the last 52-weeks.

Summary
Ciena guided to Q111 revs of $410 - $440 million during last quarters earnings report. The Street was looking for revs of $416 million at the time.

• Deutsche Bank is looking for Q1 loss of $0.09. The recently commented that "MWC checks suggest strong product cycle momentum for Ciena's 40G/100G optical transport and OTN switching systems at least three US telcos and at several rest of world telcos and ISPs." Continuing, DB thinks Ciena "appears to have the most advanced line up of optical gear – both on the transport side (40/100G coherent systems) and in OTN switching."
  
  Deutsche has a Buy on the shares with price target of $35.
  
  
• Wells Fargo expects a loss of $0.16 per share on sales of $424 million. They have a positive view on Ciena into the quarter, noting "Ciena is well positioned to benefit from a potentially significant optical upgrade cycle that is likely to take place over the next 3-5 years...Ciena is also well positioned to benefit as carriers upgrade their core switching infrastructure and deploy new Ethernet-based solutions for wireless backhaul."
  
  On Q111, Wells comments: "We believe Ciena benefitted from ramping demand for 40G LH-DWDM connectivity during the quarter. As such, we model Packet Optical Transport sales of $286M (+2.0% qtr/qtr) as well as Packet Optical Switching, Carrier Ethernet Service Delivery, and Software & Service sales of $21.5M (+0.5% qtr/qtr), $31.5M (+5.0% qtr/qtr), and $84.6M (-1.1% qtr/qtr), respectively." Gross margin expected to be 43.3% in the quarter.
  
  Wells Fargo recently initiated with an Outperform and valuation range of $32 - $35.

Ciena Corp. is expected to release their Q111 earnings on Monday, March 7, 2011, at approximately 7:00am EST. Stay tuned to StreetInsider.com's EPS Insider section to see our analysis of the highly-anticipated quarterly results within seconds of their release.

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