Ciena up 2% after beating Q1 estimates: Notes from prepared remarks -- will guide Q2 on the call
- Last quarter we shared a set of long-term financial targets (annual rev +5-7% over three years with EPS +14-16%) and our strategy for managing the business over the next several years to hit those targets.
- Non-telco revenue comprised roughly 35% of total sales. And our Direct webscale business was 15% of revenue, which is roughly double the contribution from this key customer segment in Q1'17 - both as a percentage of revenue and in absolute dollars.
- Our Asia-Pacific momentum continued. The region contributed 17% of Q1 revenue, up 25% from the same quarter last year, including contributions from several customers outside of our strong India base.
- And, our submarine business was up 10% year over year, largely driven by the continued growth of webscale traffic.
- In Q1, we had 7 new wins for our 400G-capable WaveLogic Ai, bringing us to total of 17 to date.
- We're seeing this capacity trend play out with global Tier 1 service providers, notably in Asia Pacific, where a key contributor to our Q1 growth in region was revenue from our recent wins in Japan and Korea, in addition to continued strength in India.
- This capacity trend also encompasses the metro builds we've discussed, including a strong contribution from the Verizon metro network project in Q1, which is rolling out as expected.
- Waveserver generated ~$65 million in revenue in Q1, and today claims more than 80 customers globally.
- Overall, we performed very well in Q1, including a particularly strong order flow performance for a fiscal first quarter, which is often challenging due to seasonality.
- We delivered adjusted gross margin of 42.6%, which is within our expected range and is a result of our deliberate strategy to take share from competitors and gain footprint with new and existing customers
- Co will guide Q2 guidance on the call
The High Court has refused to allow campaigners to bring a legal challenge about the government’s decision not to publish “secret” Brexit documents which give details of the likely economic impact of Britain leaving the EU.
Molly Scott Cato, a member of the European Parliament, and Jo Maugham, a barrister, on Tuesday lost their attempt to bring a judicial review challenge centring on the government’s refusal to release a raft of Brexit-related documents to the public.
The Brexit papers include studies looking at the impact of EU withdrawal on 58 sectors of the economy. The documents also include a Treasury report comparing the predicted economic impact of Brexit with the economic benefits of alternative free trade agreements.
Ms Scott Cato and Mr Maugham, who is also the founder of campaign group the Good Law Project, had argued that the release of the documents was vital to ensure a fully informed public debate about the economic impact of Brexit. Their legal case was crowdfunded and raised almost £60,000.
However the UK government has argued that a judicial review is not necessary and says Freedom of Information requests should be submitted instead for the documents.
Timothy Pitt-Payne QC, acting for Ms Scott Cato and Mr Maugham, told a court hearing on Tuesday that “timing was a matter of urgency” and said that making a Freedom of Information request to obtain the documents could take months or even years.
Negotiations about the terms of Brexit are expected to conclude by October 2018 and Britain will leave the bloc in March 2019, the court heard.
“My clients are not historians interested in recording events leading up to Brexit,” Mr Pitt-Payne told the court. “My clients are interested in educating public debate on the terms which the country is leaving the EU.”
A number of people had already made requests for the documents and had failed to obtain them, he said.
However James Eadie QC, the government’s barrister argued that Freedom of Information requests was the correct legal route for such a the request.
On Tuesday Mr Justice Supperstone said he agreed with the government and refused permission to bring a judicial review. Mr Maugham has said he hopes to appeal against the decision.
Gapping up
In reaction to strong earnings/guidance:
In reaction to strong earnings/guidance:
- BTE +12.8%, TNTR +10.4%, AMRC +10.2%, ALOG +10.1%, TEDU +8.3%, HAIR +6.3%,BZUN +6.3%, NX +5.2%, EGLE +4.8%, PQ +4.2%, YY +3.5%, CARS +3.5%, ANAB+2.5%, KLXI +2.4%, CIEN +2.3%, PARR +1.8%, NVGS +1.8%, LOGI +1.1%, (guidance),FAST +0.5%, (Feb Sales)
M&A news:
- CAG +1.9% (ConAgra responds to FTC decision to challenge the sale of Wesson oil to The J.M. Smucker - disagrees with the Commission's decision; to review all of options)
Other news:
- QDEL +5.1% (receives FDA clearance for its point-of-care Sofia Lyme Fluorescent Immunoassay)
- TI +4.3% (indicated higher on reports of Paul Singer' Elliott Management stake)
- MU +2.2% (positive Cramer mention)
- HL +1.9% (receives $31.6 million loan investment in Hecla from Ressources Quebec)
- BOJA +1.8% (CEO Clifton Rutledge resigns for personal reasons; co puts current Director James "Randy" Kibler in place as Interim President and CEO), GOGO +1.5% (CEO Michael Small steps down, co appoints appoints Oakleigh Thorne as President and CEO)
- ADRO +1.5% (earned a $3.0 mln development milestone payment under its worldwide licensing agreement with Merck for the initiation of a Phase I clinical trial of its anti-CD27 antibody)
- GSK +1.3% (reports new clinical data demonstrate high vaccine efficacy of Fluarix Tetra in children 6-35 months of age)
Analyst comments:
- GNCA +25.2% (initiated with a Overweight at Cantor Fitzgerald)
- MYL +3.2% (upgraded to Overweight from Equal-Weight at Morgan Stanley)
- HLF +2.9% (upgraded to Buy from Neutral at Citigroup)
- ALB +2.1% (upgraded to Buy from Neutral at Seaport Global Securities)
- UPS +2% (upgraded to Buy from Hold at Stifel)
- BG +1.6% (upgraded to Buy from Neutral at Citigroup)
- NTAP +1.5% (added to US 1 List at BofA/Merrill)
- ADM +1.2% (upgraded to Buy from Neutral at Citigroup)
Chinese clothes makers: got it sewn up
More customisation increases pricing power
The garment industry epitomised globalisation in the 20th century. Millennial tastes, higher labour costs and trade tensions are challenging the model. But like a double-stitched seam, there is little danger it will unravel.
China made 36 per cent of the world’s garments in 2016, according to the World Trade Organization. The supply of younger workers to the industry is set to decline by more than a quarter in the next 10 years, according to Nomura.
Companies such as Crystal International, which listed in Hong Kong last October, have responded by moving production elsewhere. Two-fifths of Crystal’s production is already in Vietnam, the third-cheapest country in the region. Labour costs are only a fifth of the costs of goods sold. Offshoring production reduces the risk of trade spats. It sometimes even supports Beijing’s foreign policies.
Consumer demand for more frequent design changes requires faster production schedules, despite smaller sales volumes per design. That is challenging for manufacturers. But more customisation ties customers to them more closely and increases pricing power. Crystal’s top five customers, among them Uniqlo owner Fast Retailing, accounted for 61 per cent of revenue in the first half of 2017.
Apparel tariffs worldwide averaged 17.5 per cent in 2016, nearly double the average on all other sectors. Investors worry about the prospect of further escalation, in view of the rhetoric from the US. Yet Asian countries import nine-tenths of their clothes from their neighbours. Euromonitor expects China to overtake the US as the largest apparel and footwear market this year.
Crystal trades at a price-to-earnings ratio a quarter below that of rival Shenzhou, whose shares have beaten benchmark indices handsomely over the past five years. Until such time when robots can stitch clothes together cheaper than humans, both companies will prosper.
UPS upgrade details -- to Buy at Stifel; tgt lowered to $121
Stifel upgrades UPS to Buy from Hold and lowers their tgt to $121 from $127 as they believe the package and general freight markets remain strong, and the stock has sold off to a valuation that firm believes reasonable considering the risks ahead and the increased capital investments expected over the next several years. Assuming Amazon remains a significant and profitable customer, and the Teamsters do not go on strike or extract significantly higher pay increases from the company in its next long-term contract (to be negotiated this summer), they believe the shares have been oversold and find it the most attractive dividend play in large cap U.S. transportation with a compelling total return story
Early premarket gamersGapping up:
- GNCA +18.4%, TNTR +10.4%, ALOG +10.1%, PQ +9.7%, HAIR +6.3%, BZUN +6%, NX +5.2%, QDEL +5.1%, EGLE +4.8%, YY +4.4%, TI +4.3%, TEDU +3.9%, BTE +2.9%, KLXI +2.4%, HL +1.9%, PARR +1.8%, NVGS +1.8%, GOGO +1.5%, ADRO +1.5%, MU +1.3%, CAG +1.1%, FATE +0.9%, ANAB +0.9%
Gapping down:
- SCYX -17.2%, GLYC -15.6%, ASNA -15.3%, FRPT -13.5%, ARES -9.1%, NLS -6.7%, UQM -6.2%, SNDX -5.6%, NYRT -3.8%, STRL -2.4%, JWN -2.2%, CDEV -1.7%, GTHX -1.5%, TGT -1.5%, RYI -1%, TRU -0.7%, LOGI -0.5%
Sainsbury’s to lift minimum pay, but scrap bonuses and paid breaks
Sainsbury’s, one of the UK’s largest grocery store chains, says it will boost the minimum pay of its employees, but also scrap bonuses and paid breaks.
The group said in a statement that it will up the base rate of pay to £9.20 an hour from £8. Workers in Zones 1 and 2, compromising central London, will receive at least £9.80 an hour.
The decision comes ahead of the increase slated for April of this year in the National Living Wage to £7.83 an hour from £7.50.
Sainsbury’s said it will fund the pay increases “through ongoing cost savings within the business.”
The higher pay will, however, come at a price: The proposal would strip away both bonuses and paid breaks. Sainsbury’s acknowledged that a “small proportion of colleagues may be adversely impacted by these proposals.”
“To support these colleagues, Sainsbury’s plans to make top-up payments for 18 months to ensure that no colleague earns less than they do today during this time,” it said.
Consultation on the plans begins on Tuesday and will take place “over the coming months”. If confirmed, employees will receive the new rate of pay from September 2018.