Here's Why Infinera Is Soaring

By MarketsFool.com

What happened

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Infinera's (NASDAQ: INFN)long-suffering investors are finally having a good day. Shares of the optical equipment manufacturer are up more than 27% as of 11:55 a.m. EST in response to a fourth-quarter earnings report that featured better-than-predicted results and revenue guidance that topped expectations.

So what

Here's a look at the company's fourth-quarter results and how they compared to the year-ago period.

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EPS = earnings per share. Data source: Infinera.

Though not pretty, the numbers actually came in at the high end of management's previously communicatedguidancerange. They also bested Wall Street's expectationof $175 million in revenue and a loss of $0.13 per share.

While its business was generally weak across the board, the company did have a few nuggets of good news to share with investors, including:

  • 30% sequentially growth in EMEA
  • Signing up six new Cloud Xpress customers
  • Receiving an initial metro order from "a large North America cable operator"

Image source: Getty Images.

Finally, management also offered up revenue guidance for the first quarter of 2017 that pleased Wall Street:

Data source: Infinera.

By contrast, analysts were only expecting $170.7 million in revenue. This outlook suggests that theworst of the declines might finally be over, hence why shares are soaring.

Now what

Infinera's management team is certainly aware that the company's numbers do not look pretty, but believes that investments in their "Infinite Capacity Engine" (ICE4) products will help to right the ship. Here's CEO Tom Fallon commenting on the company's opportunities:

While the upcoming rollout of ICE4 products certainly looks promising, investors should remember that competitors likeCiena certainly are not sitting still. In fact, Ciena has been rapidly taking market share away from Infinera over the last quarters, so it remains to be seen if customers will return once those new products become available. However, the company's new customer wins this quarter are certainly an encouraging sign, so it is hard to blame the markets for feeling optimistic.

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Brian Feroldi has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Infinera. The Motley Fool has a disclosure policy.