JDSU Rises Sharply Following Earnings - First Pro-Forma Profit Since The Bubble

JDSU (JDSUD) shares were up sharply Friday following a pair of upgrades, and a fiscal first quarter financial report in which the company reported a non-GAAP profit for the first time since the bubble. The maker of optical components for the telecom sector last night reported revenue for the quarter ended October 16 of $318.1 million, flat with the previous quarter, and a tad below Street expectations. The company reported a GAAP loss of 8 cents a share, but a pro forma profit of 3 cents a share, 2 cents above the Street projections. It was the first profit for the company in more than five years.

Friday morning, the company was upgraded…twice:

Needham’s John Harmon raised his rating to Strong Buy from Buy. While noting that JDSU is still a work in progress, he asserted that the calendar fourth quarter “looks to be a seasonally strong quarter aided by pent-up demand on the [test and measure] side.” He also said JDSU management’s operating model for the next three quarters that “offers potentially large upside to current conesnsus estimates.” Harmon says “the worst is behind” the company, “with much improved profitability ahead.” He raised his profit forecasts to 30 cents from 29 cents for the June 2007 fiscal year, and to 85 cents from 80 cents for fiscal 2008.

Deustsche Bank’s Cobb Sadler raised his rating to Buy from Hold, and like Harmon asserts that the “worst is over.” Sadler says the shares “do not currently reflect our expectations regarding material improvement in both revenue and profitability outlook for the company.” He sees improvement in both the optical components segments of the business, which accounts for about 40% of revenue, and the test and measurement segment, which accounts for another 40%. Sadler raised his pro forma profit estimates for the company to 40 cents from 27 cents for this year and to 80 cents from 59 cents for next year.

One thing to keep in mind here is that the stock had been tumbling in the weeks following its October 16 1-for-8 reverse stock split - and in fact even after today’s sharp move remains below the split-adusted price of the shares before that date. (See the chart.)

JDSU shares on Friday gained $2.30 to $16.58.

JDSU two-month chart: