What's In Store For Infinera (INFN) This Earnings Season?

Infinera Corp. (NASDAQ:INFN) , a leading optical transport network developer, is slated to report first-quarter 2017 financial numbers after market close on May 4.

Last quarter, Infinera posted a positive earnings surprise of 5.26%. Moreover, the company’s earnings surpassed the Zacks Consensus Estimate in each of the previous four quarters, with an average positive surprise of 29.84%.

Further, shares of Infinera registered growth of 10.1% compared with the Zacks categorized Computer- Networks industry’s gain of 8.8% over the past three months.

Let’s see how things are shaping up for this announcement.

Factors at Play

Headquartered in California, Infinera is a provider of Digital Optical Networking systems to telecommunications carriers, cable operators and other service providers worldwide.

We are impressed with Infinera’s strategic business moves which include new launches and alliances. Different network service providers are merging with Infinera for the deployment of the Infinera Cloud Xpress both regionally and globally, to reach out to customers with higher scalability and more reliability.

Meanwhile, the company came up with the Infinera Instant Network, the next generation of software defined capacity (SDC) for cloud scale networks. We expect the latest launch to meet the needs of the emerging 5G mobile services, the Internet of Things (IoT), video streaming, Ethernet and cloud-based on-demand business services. Infinera’s decision to power cloud scale networks should boost its cloud suite. We believe this will help the company improve its top line in the to-be reported quarter and lend it a competitive edge.

However, stiff competition from peers like Lantronix, Inc. (NASDAQ:LTRX) in the cut-throat digital optical networking market raises concerns and might hamper the company’s quarterly performance.

Earnings Whispers

Our proven model does not conclusively show that Infinera 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 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, that is not the case here as elaborated below.

Zacks ESP: Infinera has an Earnings ESP of 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at a loss of 23 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Infinera has a Zacks Rank #3 which increases the predictive power of ESP. However, the company’s 0.00% ESP makes surprise prediction difficult.

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

Stocks to Consider

Here are some companies from the Zacks-categorized broader Computer and Technology sector — which houses Infinera — that have the right combination of elements to post an earnings beat this quarter.

Sprint Corp. (NYSE:S) is expected to release fourth-quarter 2016 results on May 3. The company has an Earnings ESP of +25.00% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

The company’s bottom line surpassed the Zacks Consensus Estimate in two of the previous four quarters, with an average beat of 0.30%.

Apple Inc. (NASDAQ:AAPL) is expected to release second-quarter fiscal 2017 results on May 2. The company has an Earnings ESP of +1.00% and a Zacks Rank #3. Apple’s earnings beat the Zacks Consensus Estimate in three of the previous four quarters, with an average positive surprise of 0.89%.

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