John --
I just read the Barron's article and want to comment on one more segment:
JDS Uniphase, the biggest maker of optical components, fell 25 to 77.25 despite reporting better-than-expected profits of 18 cents a share in the latest quarter. . . .
I submit this is a blatant lie. JDSU fell on NT's news and rebounded after its own report. If I were JDS, I'd register a formal complaint to Barron's with a copy to the SEC. It's bad enough for every Tom Dick and Harry to make misleading comments about NT's report, as well as carrier spending on optics, but to publish a blatant untruth should be beyond anyone's tolerance. Barrons does itself no service by allowing this kind of reporting.
In case anyone's forgotten, JDSU dropped from 100+ to the 65 range after NT reported and then rebounded to 77 at the close of market Friday based on its excellent numbers.
finance.yahoo.com
I know I'm flogging a dead horse to imagine I can change Barrons. . . . "It ain't gonna happen, Maudy, give it up. . ."
But some things can't go unsaid.
Okay, turning to research recently published --- to give legs to what I'm trying to say --- here's a few comments gleaned from industry reports:
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JDSU:
Deutsche Bank
Technology Global Equity Research
JDS Uniphase JDSU On Time Delivery --- Perfect First Quarter FY 01 by JDS Uniphase!
Strong Buy
* JDS Uniphase reported excellent first quarter FY 01 results last night after the market's close, handily beating top- and bottom-line estimates. Management followed up with a strong conference call, a bullish outlook putting to rest investor fears of an industry slow down.
* Revenues increased 23% sequentially to $786m, above pro forma sales for the previous quarter of $641m (including E Tek Dyanmics) and handily beat our estimate of $752m (and 18% sequential growth) on strong demand from a wide variety of customers. JDS Uniphase reported pro forma EPS of $0.18 up 29% sequentially. EPS exceeded our and consensus estimates of $0.16 per share estimate driven by strong top line growth and better-than-expected margins.
* Demand continues to be very robust, in our opinion, and shows no signs of abating. The company continues to be limited only by its ability to raise capacity and meet demand. Management made it a point to address the recent issues facing Lucent (LU $21.06) and Nortel, and having checked with an extensive list of customers, expressed strong confidence in the outlook for continued strong market growth. That confidence level was backed up with increased guidance for the next quarter and for the year. We believe all evidence points to the optical components industry continuing to be supply constrained. JDS Uniphase with its size, breadth of products and execution skills remains the unquestionable leader. Management remains committed to increasing capacity 4x on a rolling 18-month time frame.
* Given the continued impressive execution by management, visibility and strong oulook we are raising our estimates for JDS Uniphase. We are raising our 2Q FY 01 revenue estimate to $928m (18% sequential growth) from $752m (10% sequential growth). We are raising our FY01 and FY02 revenue estimates to $3.9bn from $3.4bn and to $6.2bn from $5.5 bn, respectively. We are raising FY01 EPS estimate to $0.80 from $0.68 and for FY02 to $1.14 from $1.01, respectively.
* Management expressed continued confidence in being able to close the SDL transaction by the end of this calendar year. Our view is that the management of JDS Uniphase continues to execute exceedingly well and is progressing on strategic developments on all fronts to ensure the company's position as the leader in the rapidly growing optical components market. We continue to think the company should be a core holding for any technology investor. Despite the current upward revision we feel our estimates have potential for upside given the tremendous growth in the market combined with continued improvements in capacity, yields and manufacturing efficiency. We reiterate our Strong Buy rating.
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CSFB:
JDS Uniphase Corporation (JDSU, $74.44, BUY) Target (12 Months): $150
James P. Parmelee 1 212 325 6191 james.parmelee@csfb.com
Another Impressive Quarter; Raising Estimates; Reiterate Buy.
Excl one-time charges and amortization exp, JDSU posted FQ1:01 EPS of $0.18, above our $0.16 est and our previewed $0.17; Raising F2001 EPS est to $0.80 from $0.69 and rev est to $3.9B from $3.5B and F2002 EPS forecast to $1.10 from $1.00 and rev projection to $6.15B from $5.75B. JDSU EPS upside driven by strong 22.7% seq top-line growth to $786M vs our $750M forecast (previewed $770M); Sales strong across both active and passive components though WDM and 10Gbps products (incl modulators and APD receivers) particularly robust; LU, NT, and ALA were 10%+ customers (vs LU and NT in FQ4:00); Book to bill > 1.
JDSU on track for goal of 4x capacity increase over 18 mo period via improved mfg processes, increased automation and outsourcing, and expansion of physical capacity; As anticipated, yields on thin film filters dramatically improved; New Shenzhen facility (350Ksq ft) slated for vol production by year end 2000 (slightly ahead of plan).
Balance sheet strong; Accounts receivables DSOs increased seq to 58 days from 54 days and inventory turns improved to 3.9x from 3.4x in FQ4:00.
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SG COWEN
JDS Uniphase (JDSU: $74 7/16) John Butler/Geoffrey Hansen 10/27/00
Rating: Strong Buy
Price Target: $135
JDSU Reports $0.02 Upside Surprise—What a Relief!
=====================================================================================
EPS (FY June) Calendar Year Quarterly EPS
Old New EPS P/E Q1-Sep Q2-Dec Q3-Mar Q4-Jun
1999 $0.19 $0.28 265.8X $0.04 $0.04 $0.05 $0.06
2000 $0.42 $0.62E 120.1X $0.08 $0.09 $0.11 $0.14
2001 $0.68E $0.81E $0.93E 80.0X $0.18A $0.19E $0.21E $0.23E
2002 $0.93E $1.06E $0.24E $0.25E $0.27E $0.30E
=====================================================================================
Key Points:
1. Despite broad-based concern over the quarter, JDSU delivered very strong F1Q01 results, reporting EPS of $0.18--$0.02 ahead of consensus--on $786.5 MM in sales.
2. Management’s tone was confident and their outlook on the sector remains positive.
3. Sales to both Lucent and Nortel were up on a sequential basis.
4. SDLI merger remains on track to close by the end of calendar 2000.
5. We are raising our estimates based on management’s optimistic outlook and maintaining our Strong Buy rating on the stock.
Executive Summary
JDSU came through with strong F1Q01 results, which should help to stem the recent slide in the optical sector. Specifically, JDSU reported F1Q:01 (Sep.) EPS of $0.18 on $787 MM in sales. We were looking for $0.16 (in-line with consensus) on $753 MM in sales. By any measure, JDSU booked a solid quarter. As a result, we believe that these latest results could help to stem the recent slide in optical networking stocks. This slide was sparked by reports of weakness in Lucent and Nortel’s optical networking system sales this past quarter. Understandably, the investment community grew worried over the potential for this weakness to negatively impact JDSU’s results. Fortunately, this was not the case, and management did a good job of allaying concerns of any weakness evolving in the near future.
Based on these latest results, we are raising our estimates for this year and next.
Specifically, we are raising our fiscal 2001 EPS estimate from $0.68 cents on $3.4 billion in sales to $0.81 cents on $3.9 billion in sales. And for fiscal 2002, we’re raising our estimates from $0.93 cents on $5.0 billion in sales to $1.06 on $5.6 billion in sales. The major variance to our prior estimate is a higher revenue assumption, which reflects further manufacturing capacity expansion as well as the growing contribution of new products that are well positioned against emerging market opportunities such as metro and access DWDM and optical switching.
Importantly, management’s tone was very confident on last night’s conference call and its outlook was very bullish. On the call, management was emphatic that they are not seeing any downshift in demand for optical systems or components. In addition, the company indicated that it saw no evidence of “a systemic build-up of inventories” among its customers, no delay in the delivery times of existing orders and no evidence of double ordering among the carriers. The company backed its argument by pointing out that it is in constant contact with its customers in order to maintain a good understanding of their short and long term component requirements. . . .
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JDS remains firm in Optical Networking sector, from Fiber Optics Review, Oct. 2, 2000:
October 2, 2000 Deutsche Banc Alex. Brown
US Optical Networking 1
MARKET NEWS
Continued . . . Optics will be Strong in 2001
. . . the old world model of charging for the pipeline (T1 or T3 lines) is rapidly eroding; service providers have to offer wavelength services. Industry estimates suggest that DS 3 and OC 3 circuits will grow annually 106% and 221%, respectively, from 1999 to 2002. When demand grows at such an explosive rate, provisioning becomes a critical issue, in our opinion. Optical networking technologies including DWDM, Optical Switches, and Optical Cross-Connects can reduce the provisioning time from months to weeks. Dynamic provisioning, using optical equipment with software-based Network Management Systems can dramatically reduce provisioning, thereby enabling the service providers to offer services to their customers at a rapid rate. Hence our belief that, despite the current concerns about carriers’ capex, the optics sector should remain strong in 2001. Our view is that optics players will end 2000 strong and the outlook will remain strong as the long-awaited Metro market begins to ramp up.
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And from CSFB a couple weeks ago: Breaking the Bottleneck: A Wireline Weekly
Corning Pre-Announces Q3:00 EPS of $0.34-$0.35 vs. $0.30 Consensus Robust Demand In Fiber, Photonics, and LCD Businesses Drive Upside
On Thursday morning (10/12/00), Corning pre-announced that it would post pro forma EPS of $0.34-$0.35 in Q3:00 (an 80% increase over the $0.19 posted in Q3:99), handily beating the $0.30 First Call consensus projection. Revenue for the quarter is anticipated to rise greater than 50% year over year with gross mar-gins expected in the 41%-42% range (vs. 42.9% in Q2:00 and 38.9% in Q3:00).
Further, Corning management also raised full year revenue guidance to $7.1 billion from $7.0 billion (with gross margins in the 40%-41% range) and earnings per share guidance to $1.15 - $1.17 from previous guidance of $1.09, representing 70% year over year growth in pro forma EPS.
The company attributed the upside performance to strong results in optical fiber and cable, photonic components, and flat panel display products. In the optical fiber division, volume was ahead of expectations as shipment of manufactured fiber grew greater than 35% from Q3:99 and high margin LEAF represented 30% of the total volume, unchanged from Q2:00. Moreover, pricing in the quarter remained flat sequentially and year-over-year and, due to strong market demand for LEAF, management expects pricing to remain stable throughout the remainder of 2000. Lastly, management anticipates the usual degree of seasonality in Q4:00. The photonics division posted revenue of $250 million in the quarter versus $225 million in Q2:00 and more than double that in Q3:99. In the flat panel LCD division, consolidated revenues grew 75% year over year due to strong de-mand. With respect to its customer mix, Corning indicated that CLECs contributed only 5-9% of total revenue in the quarter. However, management has not seen to date any evidence of weak or deteriorating credit among its CLEC customer base. Regarding the outlook for capital spending in 2001, Corning management pointed to two trends, which mirror our thoughts published in our Breaking the Bottleneck issue dated 10/3/00. First, carriers traditionally spend more than they initially budget each year and, second, capital spending is shifting towards optical systems as next generation equipment cost up to 55% less than traditional SONET/switched base systems and increases the overall value of the network with respect to transmission quality and capacity. We believe Corning’s pre-announcement points to strong underlying demand fundamentals for both optical fiber and components, supporting our view that JDS Uniphase/SDL and New Focus will post strong CQ3:00 results.
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JPMorgan on JDSU:
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October 27, 2000
J.P. MORGAN SECURITIES INC. - EQUITY RESEARCH
CHARLIE WILLHOIT (1-415) 954-9378
JDS Uniphase (BUY)
JDS UNIPHASE COMES THROUGH IN THE CLUTCH; ANNOUNCES SOLID FISCAL 1Q/01 RESULTS
Earnings Per Share P/E
JDSU 52-Wk ------------------ ------------ MkCap
10/26 Rge 6/00 6/01 6/02 2Q/01 2Q/00 6/01E 6/02E Yld ($B)
---- ----- ----- ----- ----- ----- ----- ---- ---- ---- -----
$74.44 $153-33 $0.42A $0.81E $1.06E $0.20E $0.09A 91.9 70.2 NM 75.3
Previous $0.69E $0.90E $0.17E
Calendar 12/99 12/00 12/01 12/00E 12/01E
---- ---- ---- ---- ----
$0.28A $0.62E $0.92E 120.1 80.9
Previous $0.57E $0.78E
JDS Uniphase (JDSU) announced its 1Q/01 earnings after the close of the market yesterday. The company reported EPS results of $0.18, $0.02 ahead of Street consensus and our estimates, on revenues of $786.5 million representing 23% sequential growth and 171% year-over-year growth (we were looking for 18% and 161%, respectively). We believe this quarter served to demonstrate the continued strong demand for optical components, following dramatic worries over excess inventory issues at Nortel (NT/$45.38/Buy) and weakness at Lucent (LU/$21.06/Long-Term Buy). JDS Uniphase’s quarter is proof positive of why its good to be an arms merchant. The company is seeing tremendous growth from many systems suppliers, not just Nortel, Alcatel, and Lucent – which combined to be slightly lower than the company’s overall growth rate in the quarter. JDS is benefiting from a diversified customer base, a broad product offering, and the continued supply and demand gap that exists for optical components. The positive results at JDS are consistent with strong results across the board this quarter for both optical components and related comm. IC companies. Key to helping calm fears is management's increased guidance for revenue growth into 2Q/01 and the remainder of fiscal 2001 (ended in June). Previous guidance called for 90% revenue growth in 2001, which was raised to 115- 120%, a range which we believe may still be conservative. We are raising our fiscal 2001 EPS estimate from $0.69 to $0.81 and our fiscal 2002 EPS estimate from $0.90 to $1.06. We continue to believe that our estimates are conservative, given the strong growth, continued output increases, and likely successful integrations of E-TEK Dynamics and other recent acquisitions over the coming quarters. We reiterate our BUY rating on shares of JDSU.
We are raising our EPS estimates for fiscal 2001 from $0.69 to $0.81 and for fiscal 2002 from $0.90 to $1.06. While our estimates are on the high-end of company guidance, we believe that these numbers are very achievable. Guidance for sequential revenue growth in 2Q/01 is in the high-teens (we have 18% in our model) – up from the 9-10% number we had been projecting. We expect gross margins to remain in the 50%-51% range (it was up 40 basis points to 51% this quarter), with upside leverage as the company's new facility expansions, yield improvements, automation efforts, and outsourcing initiatives continue to come on-line.
From a valuation perspective, JDSU is now trading at just over 17 times fiscal 2001 revenue estimate and 91 times our fiscal 2001 EPS estimate. JDS is projected to grow revenues at 120% and EPS at 93% in fiscal 2001.
. . .
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J.P. Morgan Securities Inc. - Equity Research
Morning Meeting Research Notes
JPMS Fiscal EPS Estimates for JDSU
1Q01E 2Q01E 3Q01E 4Q01E FY01E FY02E
Current EPS Estimates $0.18 $0.20 $0.21 $0.22 $0.81 $1.06
Previous EPS Estimates $0.17 $0.18 $0.18 $0.69 $0.90
Source: JPMS estimates.
Important points from the call:
· Strong Customer Relationships and Markets - Management provided greater insight on the call regarding how its 80 sales engineers worldwide keep constant tabs on customers and their inventory levels. In particular, JDS Uniphase management emphasized that it has seen 1) no systematic inventory builds at its customers, 2) no double booking, 3) no change in order size beyond general increases with demand, and 4) no stretching of delivery schedules. Lead times have also not changed for the company as demand continues to keep pace with JDS Uniphase’s output growth. The metro market is beginning to be a stronger one for the company consistent with commentary on Nortel’s call. While we have known for awhile that metro would pick up for our names, we believe that we are seeing initial signs of significant demand in that market. Additionally, we continue to grow more comfortable with the prospect of 40 Gbps. components entering the market lightly over the next several quarters and meeting equipment providers’ goals of OC-768 systems shipments by the end of calendar 2001. We do not want to underestimate the technology challenges ahead for high-speed modulators (and drivers), higher-power lasers, integrated optics and semiconductor technology, etc. but we do believe that OC-768 will see some significant success into 2002 and ramping in 2003.
· Aggressive Capacity and New Design Win Expansion - We hate to sound like a broken record but capacity expansion and new design wins do continue to be focal points of JDS Uniphase’s top-line growth strategy. The company continues to work towards increasing output by 4x every 18 months growing its 30 facilities worldwide. We believe JDS has made significant strides in ramping its automation (25% of its centerpiece coupler assembly is now automated), outsourcing what assembly it can (Celestica is set to take on more work for JDS and all electronic board assembly is done by its partners), moving capacity over to lower-cost operations in Asia (the company now has 2 locations in China and one in Taiwan), and generally improving its manufacturing yields. The company has also made progress in generating new design wins for its OC-192 transceivers (long-haul and intermediate reach) with 15 new customers in the quarter, directly modulated lasers (for short-haul applications), high-speed modulators (shipments were up 40% sequentially), metro optical amplifiers (called amplets), semiconductor optical amplifiers (SOAs), 10 Gbps. photodiodes (3x output increase sequentially), 100 GHz array waveguides (AWGs), and interleavers among others.
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Perhaps a few journalists should take the time to read a few of these reports themselves.
Pat |
