Which Communications Tech Stocks Have the Strongest Earnings Trends?

Earnings trends are extremely important when evaluating stocks. At Wall St. Cheat Sheet, we view increasing earnings quarter-over-quarter as a simple way to gauge whether costs and the business model are stable. Then we like to analyze whether the company is outperforming peers in the sector. This is what we call the “E-Squared” investment analysis (‘E = Earnings Are Increasing Quarter-Over-Quarter’ + ‘E = Excellent Relative Performance Versus Peers and Sector’).

Stocks with improving earnings metrics are worthy of your extra attention. Click here to discover our CHEAT SHEET stock picks now!

Here’s your Cheat Sheet to how the top 5 communication tech stocks rank via earnings trends:

ADTRAN Inc. (NASDAQ:ADTN): Current Price $20.98

Fiscal Year 2008 2009 2010 2011 2012
Revenue ($) in millions 500.68 484.18 605.67 717.23 620.61
Diluted EPS ($) 1.22 1.17 1.78 2.12 0.74

This company was doing well up to 2011 with nice growth seen across both the top line and earnings. However, 2012 proved to be a challenge.

Next, our CHEAT SHEET investing framework asks us to drill down to the recent quarterly data:

Quarter Dec. 31, 2011 Mar. 31, 2012 Jun. 30, 2012 Sep. 30, 2012 Dec. 31, 2012
Revenue ($) in millions 175.29 134.74 184.00 162.12 139.76
Diluted EPS ($) 0.48 0.20 0.33 0.15 0.06

Things have been rocky here — particularly over the last three quarters. We’ll have to look elsewhere…

Cisco Systems, Inc. (NASDAQ:CSCO): Current Price $21.01

Fiscal Year 2008 2009 2010 2011 2012
Revenue ($) in millions 39,540 36,120 40,040 43,220 46,060
Diluted EPS ($) 1.31 1.05 1.33 1.17 1.49

Though revenue has grown steadily after 2009, earnings have been less consistent for this tech stock bellwether.

Let’s take a look at the quarterly data:

Quarter Oct. 31, 2011 Jan. 31, 2012 Apr. 30, 2012 Jul. 31, 2012 Oct. 31, 2012
Revenue ($) in millions 11,260 11,530 11,590 11,690 11,880
Diluted EPS ($) 0.33 0.40 0.40 0.36 0.39

Unfortunately, quarterly earnings growth does not offer much joy. It has essentially remained flat across the last four quarters. Let’s turn our attention to another candidate…

Juniper Networks, Inc. (NYSE:JNPR): Current Price $21.49

Fiscal Year 2007 2008 2009 2010 2011
Revenue ($) in millions 2,836 3,572 3,316 4,093 4,449
Diluted EPS ($) 0.62 0.93 0.22 1.15 0.79

Certainly nice growth in revenue here. EPS is quite another story, proving to be rather cyclical.

Quarter Sep. 30, 2011 Dec. 31, 2011 Mar. 31, 2012 Jun. 30, 2012 Sep. 30, 2012
Revenue ($) in millions 1,106 1,121 1,032 1,074 1,118
Diluted EPS ($) 0.16 0.18 0.03 0.11 0.03

Juniper disappoints on the quarterly data. In the September 2012 quarter, EPS was hit hard. We’re afraid it doesn’t quite make the grade…

Alcatel-Lucent (NYSE:ALU): Current Price $1.65

Fiscal Year 2007 2008 2009 2010 2011
Revenue ($) in millions 25,980 23,640 21,140 21,220 19,880
Diluted EPS ($) -2.14 -3.38 -0.33 -0.20 0.54

Problems everywhere for ALU as sales and profits hit the skids from 2007 through 2010.  A positive 2011 EPS number is small consolation.

Quarter Sep. 30, 2011 Dec. 31, 2011 Mar. 31, 2012 Jun. 30, 2012 Sep. 30, 2012
Revenue ($) in millions 5,230 5,473 4,237 4,491 4,662
Diluted EPS ($) 0.11 0.38 0.19 -0.14 -0.08

This stock is best avoided, considering it has been in the red the past two quarters…

CIENA Corp. (NASDAQ:CIEN): Current Price $15.44

Fiscal Year 2008 2009 2010 2011 2012
Revenue ($) in millions 902.45 652.63 1,237 1,742 1,834
Diluted EPS ($) 0.42 -6.37 -3.58 -2.04 -1.45

Ciena has been steadily increasing its sales and reducing losses over the past four years. But would we want to invest in a company losing money?

Quarter Oct. 31, 2011 Jan. 31, 2012 Apr. 30, 2012 Jul. 31, 2012 Oct. 31, 2012
Revenue ($) in millions 455.45 416.68 477.62 474.09 465.53
Diluted EPS ($) -0.21 -0.49 -0.28 -0.30 -0.38

Still a sea of red here. Ciena is obviously a no-no for us.

Conlcusion

In conclusion, Cisco appears to be the best among its peers, on account of its steady quarterly profitability and an improvement in EPS quarter-over-quarter.

“E = Earnings Are Increasing Quarter-Over-Quarter” is a core component of our successful CHEAT SHEET investing framework. Don’t waste another minute – click here to discover our CHEAT SHEET stock picks now!