Infinera: Zacks’ Bull of the Day Play

Infinera Corp (INFNSnapshot Report) has seen its estimates increase due to the Cloud Xpress product launch announced in mid-September, and its metro cloud market transition.  These factors, combined with the decreased worry regarding negative European revenues (which accounted for about 15% of total revenue in the first half of 2014), have made Infinera Zacks Bull of the Day.

This Zacks Rank #1 (Strong Buy) stock provides digital optical networking systems to telecommunication carriers, cable operators and other service providers worldwide.  Further, Infinera reports Q3 2014 earnings after the bell tomorrow.

It is expected that Infinera’s Cloud Xpress will cut power usage by 50% compared to comparable metro cloud solutions.  It was announced that Cloud Xpress will begin shipping in December of this year, and that Infinera sees strong and immediate demand for its optical transport solutions.

Increasing Estimates

The table below shows the historic and future Price and Consensus estimates for Infinera.
Over the past 90 days the FY 2014 EPS estimates have risen from -$0.04 to $0.06, and have also increased for Q3, from -$0.01 to $0.02.  These numbers reflect the positive traction from the Cloud Xpress, and its metro cloud market.

Positive Earnings Surprise

Historically, Infinera has destroyed the Zacks Consensus Earnings estimate.  Over the past 4 quarters, Infinera has posed an average positive earnings surprise of 199.1%, with a massive 400% positive earnings beat last quarter.

The table below shows the past four years of EPS Surprises for Infinera, and as you can see, INFN has a strong history of not only beating earnings, but crushing them.

Company Data

After more than 15 consecutive quarters of negative Return on Total Capital, Return on Equity, Return on Tangible Equity, and Return on Assets, Infinera was able to post positive returns in all 4 categories for the second quarter 2014.  This trend is expected to continue with the launch of the Cloud Xpress and its metro cloud market transition.

Bottom Line

Infinera has two solid new products that have high demand and high functionality.  These new products coupled with less weakness in Europe has Infinera poised for a solid jump in price appreciation over the next 1-2 days.

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