Earnings Preview: JDS Uniphase

| About: Viavi Solutions (VIAV)
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JDS Uniphase (JDSU) is expected to report Q4 earnings after market close Wednesday, Aug. 20,  with a conference call scheduled for 5:00 pm ET.


The consensus estimate is 10c for EPS and $395.83M for revenue, according to First Call. Guidance provided on the last earnings call was for Q4 revenue of $381M to $403M, lower than the consensus estimates at that time.

Analyst Views

A few weeks after reporting Q3 earnings in April, and marking its fifth successive quarter of reporting positive free cash flow, JDS announced a $200M stock buyback plan. Less than two months later, on July 11, management announced it had completed the whole buyback plan.

RBC Capital is expecting encouraging results from JDS with total revenues to come in slightly ahead of consensus and above the midpoint of the guidance range as the company recovered some previously slipped T&M deals. The firm see non-GAAP EPS possibly closer to its 12c estimate due to product mix which may skew operating margins. FY1Q09, with an overall book to bill greater than 1.0, RBC Capital believes JDS may provide revenue guidance in a range of $382M to $404M versus the current consensus of $400M. JDSU may continue to emphasize short lead times and the book and ship nature of the CommTest division. RBC said that optical communications may see some magnified seasonality in the near term as vendor customers adjust to capex reductions at Sprint (NYSE:S) and lumpy cable builds.

Having said that, RBC Capital has noted healthy demand for ROADM components. Overall, RBC Capital expects gross margins may bounce back from depressed levels closer to 43.5% and they expect JDS to reiterate its long term gross margins of 43% to 47% and its longer term operating margins of 10%.

Trade action: Midnight Trader said that JDSU is one to watch for potential next-day wider movement as the stock has seen more aggressive next-day action following 15 of its last 18 after-hours earnings events. The near-term performance favors widening, as the issue has expanded its after-hours move in next-day regular session trade in three of the last four quarters.

Next Events: Sept. 3 at the Citigroup 15th Annual Global Technology Conference; and Sept. 9 at the Deutsche Bank 2008 Technology Conference.