(By Kevin Donovan) JDS Uniphase (JDSU) shares are off their lows but still down more than 2% ahead of the company's report on fiscal fourth-quarter results after the close today. Shares gained $0.12 yesterday. We're buyers ahead of the announcement given the company's strong balance sheet, optimistic guidance and a recent history of meeting or beating forecasts.
Recently quoted at $10.82, the shares have traded between 8.47 and 15.17 in the past 52 weeks. On a forward basis, the shares trade at about 14 times projected earnings, in line with the S&P 500.
Analysts expect on average $0.12 in EPS and $422.6 million in revenue. Forecasts range from $0.09 to $0.14 and $408 million to $430 million. In the previous two quarters, JDS met estimates and beat by 50%.
Key, in our view, will be the direction of margins and operating cash flow, both of which have been anemic of late. The ability to control costs in an uncertain economic environment should be highly prized by investors. In the third fiscal quarter, JDS reported an operating margin of 7.3%, down from 9.6% the previous quarter, largely due to lower average selling prices and product mix. Cash flow from operations came in at $13.2 million, down from $45.7 million in the fiscal first quarter.
But management has expressed confidence that demand in its core businesses remains healthy. And the company's balance sheet is strong with a current ratio of 3.49 and sub-1.00 debt-to-equity ratios.
JDS Uniphase Corporation provides communications test and measurement solutions and optical products to telecommunications service providers, cable operators and network equipment manufacturers.