red herring's take on earnings. they note that the sale of stock (anonymously) cited in the press release was AFCI -- pre-implosion.
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EARNINGS UPDATE: TELLABS POSTS AMAZING QUARTER
By Peter D. Henig
Red Herring Online
July 16, 1998
Tellabs (TLAB) is the latest tech company to blow away Wall Street and add to the Nasdaq's 2,000-point milestone.
After reporting earnings Thursday morning, Tellabs was up as much as 6 points to 84.69 in the afternoon, as the Nasdaq reached an all-time high of 2001.41.
The manufacturer of voice and data transport and network access systems announced second quarter earnings per share of 0.63, versus 0.32 for the same period a year ago, and six-month earnings of 1.00, compared to 0.66 for the same period a year ago.
Sales for the second quarter ending July 3 were $387.7 million, up 32.5 percent over sales of $292.7 million in the similar period of 1997. In a prepared statement, Tellabs reported that this marks the 28th consecutive quarter in which sales surpassed prior-year levels. Sales for the first six months of the year were $715.2 million, also up 32.5 percent compared with sales of $539.8 million a year earlier.
Fiber boost
Analysts were ecstatic at the results.
Net income for the second quarter of $119 million included a pre-tax gain of $73.4 million on the sale of stock in Advanced Fibre Communications (AFCI) and the settlement of hedge contracts on those shares, as well as an additional pre-tax writeoff of $24.8 million on assets of the company's Wireless Systems Division that were determined to be impaired.
But the company still beat the Street's highest estimates for Q2 earnings. Excluding the effect of the second-quarter gain and charge, earnings of 0.46 increased 46.8 percent over the same quarter last year, topping Zack's Investment Survey's analyst estimates of a 42-cent quarter.
"They had a spectacular quarter, but one of their smartest moves was unloading their Advanced Fiber shares before the market collapsed," said Raj Srikanth, analyst with Schroder & Co. "Another positive is that they got hopscotch approval from the Department of Justice to move ahead with their acquisition of Ciena."
In June, Tellabs and Ciena Corporation (CIEN) announced a definitive merger agreement, under which Tellabs will exchange one share of its stock for each share of Ciena stock. Both companies expect this transaction to close during the third quarter, and Ciena's stock was performing equally well, up 6.06 per share, or 7.85 percent, to 83.31 in afternoon trading on Thursday.
"[Tellabs] had an absolutely outstanding quarter," said Michael Neiberg, analyst with Furman Selz.
Mr. Neiberg noted that the real driver behind the company's success is that their basic business, the Titan, is accelerating each quarter. The Titan's large installed base means continuous upgrades will further fuel growth.
"Basically, they are in a great position going forward," said Mr. Neiberg, who maintains a Buy rating on the stock and feels that it can easily achieve 100 by December, if not sooner.
"This is one of the best companies in the entire sector," gushed Mr. Srikanth. "They have fantastic management, and that means fantastic earnings."
Tellabs
This quarter (reported): 0.46
This quarter (projected): 0.42
Last quarter (reported): 0.37
This year: 1.77
Next year: 2.26
Analyst recommendations
Strong Buy: 15
Buy: 10
Hold: 1
redherring.com |
