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FNSR earnings
Source: FINISAR Products

Q4 2018 earnings result

Following analysis is based on non-GAAP: Finisar’s earnings result for Q4 2018 show diluted earnings per share (EPS) of $0.05 per share. The prevailing market expectation was around $0.12 per share. At this low numbers, we deem this miss to be fairly material.

EPS  is outside the lower bounds of the outlook between $0.09 to $0.15 per share. Gross margin of 24.7% fell outside the lower bound of the outlook between 27% to 28%. Expected Q1 2019 outlook does not pose an improvement with slightly declining Revenues, Gross Margins and maintaining expected EPS.

Following analysis is based on GAAP: Q3 2018, Q2 2018 and Q1 2018 show a diluted earnings per share of $-0.49 per share, $0.05 per share and $0.17 per share, respectively. We note the declining trend on a per quarter basis. 2017 and 2016 annual diluted earnings per share have been $2.19 per share and $0.32 per share, respectively.

Operating cash flow remains positive and strong. Free cash is used to engage in investing (for the future) activities and reducing long-term liabilities whilst keeping sufficient cash reserves. We deem this to be a long-term positive signal for company health and growth. Revenues have been within the bounds of Q4 outlook.

Share price development

FNSR earnings
Source: yahoo finance

Prices have closed at $17.70 and traded at $18.00 just 40 minutes into off-market trading hours. The 1.7% move was effected with normal average daily volume.

The share price has been experiencing a constant decline since it closed at a record high of $34.48 in late February of 2017. The price closed yesterday at $17.15. This represents a decline of more than 50% over a period of 14 months. The sell-off interest was sparked by the declining market outlook from quarter to quarter at that time, despite achieving record revenues. In addition, Finisar was able to generally beat declining quarterly outlooks by a small margin.

Q4 2018 Outlook

  • revenues are expected in the range of $300 to $320 million
  • non-GAAP gross margin of approximately 27%-28%
  • non-GAAP operating margin of approximately 4%
  • non-GAAP earnings per fully diluted share in the range of approximately $0.09 to $0.15

Q1 2019 Outlook

  • revenues are expected in the range of $305 to $325 million
  • non-GAAP gross margin of approximately 26%-27%
  • non-GAAP operating margin of approximately 4%-5%
  • non-GAAP earnings per fully diluted share in the range of approximately $0.10 to $0.16
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FNSR logo

About Finisar

As a technology innovator, Finisar has led the industry in creating and delivering breakthrough optics technology and world-class products for three decades.  With the broadest product portfolio in the industry, Finisar is a trusted partner to networking equipment manufacturers, data center operators, telecom service providers, consumer electronics and automotive companies.  Finisar’s next-generation products for network bandwidth, data storage and 3D sensing subsystems include optical transceivers, active optical cables, optical engines, communication components, sensing components, wavelength management, ROADMs, WSS, optical amplifiers, RF-over-Fiber, and optical instrumentation.

Conflicting interest disclosure

We do not hold any interest in FNSR. We may engage in positions within 72 hours depending on the signals provided by our trading strategies.

Disclaimer

None of the above statements are to be construed as financial advice nor should they be used as a basis for making a financial decision. Investing in financial instrument carries great risks and may cause you to lose potentially much much more than what you invested. Historical market performance does not give an indication of future market performance. We advise you to hire a financial expert before making any financial decision of any kind and to ensure that you are aware of all the risks associated with investing in a particular financial product. Participating in electronic markets carry additional risks as well.

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