Infinera: Zacks’ Bull of the Day Play

Infinera Corp (INFNSnapshot Report) recently crushed the Zacks Consensus Earnings Estimate for the seventh consecutive quarter, and beat the Zacks Consensus Revenue Estimate for the third consecutive quarter as well.  The beats were attributed to gross margins, operating margins, broad-based customer strength and their CloudXpress products.   Therefore, Infinera has become the Zacks Bull of the Day.

This Zacks Rank #1 (Strong Buy) provides Digital Optical Networking systems to telecommunications carriers, cable operators, and other service providers worldwide.  Infinera’s large-scale photonic integrated circuit incorporates hundred Gigabits per second of transmit and receive capacity and the functionality of more than sixty discrete optical components into a pair of indium phosphate chips.

The innovative CloudXpress currently has 7 customers, including 3 new clients, and it is expected that these customers will generate revenues between $35-$60 million in 2015.  Further, the company has seen customer strength in several other segments which has improved overall gross margins (+47.8%), and operating margins (+12.2%).

Increasing Estimates

The table below shows the historic and future EPS estimates for Infinera.

Over the past 30 days, estimates for Q2 15, Q3 15, FY 15 and FY 16 have all increased; Q2 15 rose from $0.04 to $0.05, Q3 15 increased from $0.07 to $0.08, FY 15 went from $0.25 to $0.27, and FY 16 rose from $0.44 to $0.55.

Positive Earnings Surprise and Guidance

Historically, Infinera has crushed the Zacks Consensus Earnings Estimates.  Over the past 4 quarters, Infinera has posted and average positive earnings surprise of +195%, with a huge +120% earnings beat last quarter.  For Q2 the company issued revenue guidance of between $195-205 million, which would indicate 21% year over year growth (midpoint).

Bottom Line

Infinera’s CloudXpress, solid margins, and a growing customer base has the company poised for long term earnings and revenue growth.  Further, the company continues to innovate and produce new products for their diverse customer base.  The company announces Q2 earnings data on 7-22-15.

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