Finisar's (FNSR) Q3 Earnings Beat, Revenues Decline Y/Y

Finisar Corporation’s (NASDAQ:FNSR) third-quarter fiscal 2019 (ended Jan 27, 2019) revenues decreased year over year but net loss narrowed. The bottom-line performance was largely driven by lower provision for income tax and reduction in manufacturing overhead.

Net Loss

On a GAAP basis, net loss for the reported quarter was $15.3 million or loss of 13 cents per share compared with net loss of $55.7 million or loss of 49 cents per share in the year-ago quarter. The year-over-year improvement was driven by higher operating income and lower provision for income tax.

Notably, non-GAAP net income came in at $34.2 million or 29 cents per share compared with $22.8 million or 20 cents per share in the prior-year quarter on the back of favorable adjustments. The bottom line beat the Zacks Consensus Estimate by 2 cents.

Finisar Corporation Price, Consensus and EPS Surprise

Revenues

Quarterly revenues decreased 1.4% year over year to $327.6 million primarily due to decline in sales of 10G and Ethernet transceivers. The top line lagged the consensus estimate of $343 million.

Other Quarterly Details

Cost of revenues was $232.7 million compared with $243.7 million in the year-ago quarter. Gross profit was $94.4 million compared with $88.1 million in the year-ago quarter. Margin was 28.8% compared with 26.5% in the year-ago period. Higher margin could be attributed to favorable product mix and decrease in manufacturing costs. Total operating expenses decreased to $93.9 million from $94.2 million. Finisar reported operating income of $0.5 million against a loss of $6.1 million in the prior-year quarter, primarily due to higher gross profit and lower operating expenses.

Liquidity

As of Jan 27, 2019, Finisar had $906.9 million in cash and equivalents with $506.5 million of convertible debt (net of current portion).

The company did not provide guidance for the fourth quarter of fiscal 2019 due to its previously announced proposed acquisition by II-VI Incorporated (NASDAQ:IIVI) .

Zacks Rank & Stocks to Consider

Finisar currently has a Zacks Rank #3 (Hold). A few better-ranked stocks in the broader industry are Harris Corporation (NYSE:HRS) and Motorola Solutions, Inc. (NYSE:MSI) , both carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Harris has a long-term earnings growth expectation of 8%.

Motorola has a long-term earnings growth expectation of 8%.

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