Market Bets JDS Will Beat Expectations
By Susan Taylor
Tuesday October 26 4:20 PM ET
OTTAWA (Reuters) - Investors betting that fiber-optic equipment maker JDS Uniphase Corp (Nasdaq:JDSU - news). will continue its track record of beating expectations when it reports first-quarter results sent the stock to new highs Tuesday.
Over the last week, the stock has soared an impressive 24 percent, ending at C$216 Tuesday from a close of C$174.50 on the Toronto Stock Exchange on October 19. The previous high this year was C$207.50.
On Nasdaq, the issue was up 25.5 percent with a value of 146-13/16 Tuesday from a close of 116-15/16 one week ago. The previous 52-week high was 140-9/16.
Analysts agree that JDS is likely to surpass the 25 cents per share consensus estimate of 24 brokers polled by First Call/Thomson Financial.
The question now is by what degree it will better estimates.
``I think there is in the stock, implicit in the valuation, an expectation that they will beat the numbers,' said James Kedersha, analyst at SG Cowen & Co. in New York. ``It's very strong recently.'
The product of a June 30 merger between San Jose, California.-based Uniphase Corp. and Ottawa-area based JDS FITEL Inc., the firm supplies components to the red-hot fiber-optic network market.
The company develops equipment that boosts the capacity and performance of those networks, which carry data on light wavelengths.
``There is an expectation in investors' minds that this is the future -- optics is the future -- and JDS Uniphase is one of the leading providers of the components for those systems,' said Patrick Houghton, analyst at Sutro & Co. in San Francisco.
Strong prospects suggest that the firm's guidance of a $1.11 per share profit in fiscal 2000 and $1.59 in 2001 are too low, he added. ``The going-forward numbers are rather ridiculously conservative,' Houghton said.
Analysts will keep a keen eye on revenue growth in the quarter, hoping to see at least a 15 percent improvement over the previous fourth quarter.
Despite a blistering demand, production levels are not expected to be a problem.
``They said yields in most of their areas have been up,' Kedersha said. ``The news sounded pretty good.'
Signals from key customers also appear promising.
Murray Hill, New Jersey-based Lucent Technologies Inc (NYSE:LU - news)., which represents 17 percent of JDS sales, reported a 50-percent increase in fourth quarter profits Tuesday morning.
Brampton, Ontario.-based Nortel Networks Corp (NYSE:NT - news)., which accounts for 10 percent of JDS sales, is expected to report a strong third quarter after market close Tuesday.
Further details of JDS's corporate shopping spree during the quarter are also expected to be outlined in a conference call Thursday.
JDS struck a $400-million deal to buy Trenton, New Jersey-based EPITAXX Inc. on October 4 and bought tiny component developer Ramar Corp. on October 18, but the terms of that deal were not disclosed |
