We upgraded our recommendation on
JDS Uniphase Corp.
) to Outperform based on the company's second quarter of fiscal
2013 financial results, which outpaced the Zacks Consensus
Why the Upgrade?
In the reported quarter, JDS Uniphase improved with respect to
several operating metrics. These include adjusted gross and
operating margins, adjusted EBITDA and cash flow. The company's
newly launched differentiated products are gaining solid market
traction. We believe carrier expenditure for broadband network
buildout, mobility and 100 Gbps Ethernet will increase in 2013,
aiding JDS Uniphase's prospects over the long haul. Management
provided an optimistic outlook for the rest of fiscal 2013.
We believe Communications and Test Measurement division of JDS
Unipahse will be immensely benefited from massive growth of
wireless backhaul and DOCSIS 3.0 networks. As the wireless
carriers are gradually increasing their backhaul capacity due to
significant growth of mobile Internet traffic and multimedia
applications, the cable operators are quickly deploying DOCSIS
3.0 networks to compete by providing faster data access
Next-generation 4G Long-Term Evolution (LTE) networks became
another major growth driver for JDS Uniphase. The company offers
an innovative LTE test solution, which encompasses end-to-end,
real-time tracing, data assurance, and OSS to derive the
performance and revenue potential of LTE.
Management stated that the company is witnessing growing
carrier spending in those areas where it has strong presence with
industry leading products. Several original equipment
manufacturers and telecom service providers will ramp up spending
in the second quarter of CY 2013 (the fourth quarter of fiscal
2013 for JDS Uniphase). The initial demand for the ensuing third
quarter is very encouraging. Additionally, China has taken a
massive project to upgrade the country's wireline networks to 100
Other Stocks to Consider
JDS Uniphase currently has a Zacks Rank #4 (Sell). Other
stocks to consider in the optical networking industry are
). While Finisar currently has a Zacks Rank #3 (Hold), both Ciena
and Oclaro have a Zacks Rank #4 (Sell).
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