Will JDS Uniphase (JDSU) Beat Earnings Again? - Analyst Blog

JDS Uniphase Corporation JDSU, a leading provider of communications test and measurement solutions, is slated to report third-quarter fiscal 2014 earnings after the closing bell on April 30, 2014.

In the prior quarter, the company's earnings surpassed the Zacks Consensus Estimate by a margin of 33.33%. Let's see how things are shaping up for this announcement.

Factors to Influence This Quarter

We believe that the Communications Test and Measurement division of JDS Uniphase will be immensely benefited from the massive growth of wireless backhaul and DOCSIS 3.0 networks deployment. As wireless carriers are gradually increasing their backhaul capacity due to significant growth of mobile Internet traffic and multimedia applications, cable operators are rapidly deploying DOCSIS 3.0 networks to provide faster data access speeds. Several industry researchers have estimated that the market size for mobile backhaul Ethernet equipment may exceed $5 billion by 2014.

JDS Uniphase bought Network Instruments, a global developer of enterprise network and application-performance management solutions, for $200 million in cash. The acquisition will strengthen JDS Uniphase's foothold in the enterprise, data center and cloud networking segments.

On the other hand, the optical component industry is still not out of the woods. Some industry experts opine that demand from the largest emerging market of China will not meet expectations. JDS Uniphase is highly dependent on China, since the developed western world is still reeling under economic headwinds.

Earnings Whispers

Our proven model does not conclusively show that JDS Uniphase is likely to beat the Zacks Consensus Estimate this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. Unfortunately, this is not the case here as elaborated below.  

Zacks ESP: The Most Accurate estimate and the Zacks Consensus Estimate are poised at 4 cents. Hence, the ESP is 0.00%.

Zacks Rank: JDS Uniphase's Zacks Rank #3 (Hold) when combined with a 0.00% ESP makes surprise prediction difficult.

We caution against stocks with Zacks Rank #4 and 5 (Sell-rated stocks) going into an earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Other Stocks to Consider

Here are some other companies to consider as our model shows these have the right combination of elements to post an earnings beat this quarter.

Marvell Technology Group Ltd. MRVL with Earnings ESP of +6.67% and Zacks Rank #2 (Buy).

Ciena Corp. CIEN with Earnings ESP of +66.67% and Zacks Rank #3 (Hold).

DigitalGlobe, Inc. DGI with Earnings ESP of +314.29% and Zacks Rank #3 (Hold).