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Finisar (FNSR) Up 4.1% Since Last Earnings Report: Can It Continue?

A month has gone by since the last earnings report for Finisar (FNSR). Shares have added about 4.1% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Finisar due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Finisar Q4 Earnings Beat Estimates, Revenues Miss

Finisar's fourth-quarter fiscal 2019 (ended Apr 28, 2019) revenues remained almost flat year over year but net loss narrowed. The bottom-line performance was largely driven by lower cost of sales.

Net Loss

On a GAAP basis, net loss for the quarter was $14.2 million or loss of 12 cents per share compared with net loss of $18.3 million or loss of 16 cents per share in the year-ago quarter. The year-over-year improvement was mainly driven by lower cost of sales. For fiscal 2019, net loss was $53.2 million or loss of 45 cents per share compared with net loss of $48.3 million or loss of 42 cents per share in fiscal 2018.

Non-GAAP net income for the reported quarter came in at $33 million or 27 cents per share, beating the Zacks Consensus Estimate by a penny.

Revenues

Quarterly revenues remained almost flat year over year at $310.1 million. The top line lagged the consensus estimate of $328 million. For fiscal 2019, revenues decreased 2.7% year over year to $1,280.5 million.

Other Quarterly Details

Cost of revenues was $218.5 million compared with $246.5 million in the year-ago quarter. Gross profit was $87.3 million compared with $62.6 million in the year-earlier quarter. Gross margin was 28.2% compared with 20.2% in the year-ago quarter. Total operating expenses increased to $98.6 million from $89.3 million, primarily due to higher startup costs. Finisar reported operating loss of $11.3 million compared with loss of $26.7 million in the prior-year quarter.

Liquidity

As of Apr 28, 2019, Finisar had $814.2 million in cash and equivalents with $512.1 million of convertible notes (long-term liabilities). The company did not provide guidance for the first quarter of fiscal 2020 due to its previously announced proposed acquisition by II-VI Incorporated.

How Have Estimates Been Moving Since Then?

Fresh estimates followed a downward path over the past two months. The consensus estimate has shifted -27.55% due to these changes.

VGM Scores

At this time, Finisar has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Finisar has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.


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