What happened
Shares of Lumentum (LITE +8.16%) are losing ground in Wednesday's daily trading session following recently published fiscal fourth-quarter reports from its rival Coherent (COHR +5.31%). The company's share price was down 12% as of 12:15 p.m. ET, according to data from S&P Global Market Intelligence. Meanwhile, Coherent stock was down 34.1%.
Lumentum stock is falling due to disappointing targets issued by Coherent -- a fellow player in the laser technologies space. Coherent's fourth-quarter report arrived with guidance for significant sales and earnings declines this year, and investors are worried that Lumentum will face similar headwinds.
So what
Coherent published results for the fourth quarter of its recently concluded fiscal year, which ended June 30, before the market opened up this morning. Lumentum shareholders were clearly paying attention.
NASDAQ: LITE
Key Data Points
Coherent's sales and earnings targets for the current fiscal year came in well below Wall Street's expectations and suggest that the business will see substantial sales and earnings declines. The company is guiding for non-GAAP (adjusted) earnings per share between $1 and $1.50 on revenue between $4.5 billion and $4.7 billion. Meanwhile, the average analyst estimate had aniticipated adjusted earnings per share of $2.95 on revenue $5.1 billion.
In its recently completed fiscal year, the company posted adjusted earnings per share of $3 on revenue of $5.16 billion. At the midpoint of its guidance ranges, Coherent is calling for earnings to decline roughly 58% annually and sales to dip approximately 11%.
While a competitor's stumbles can be good news in some cases, they can also signal broader industry trends. With Coherent delivering disappointing guidance, investors are concerned that Lumentum will face similar headwinds.
Now what
In its letter to shareholders, Coherent noted that macroeconomic headwinds and uncertainty were limiting its growth opportunities. It appears that customers are taking a cautious approach to new orders and working through existing inventory, and the trend is depressing business performance.
Coherent had actually been on track to acquire Lumentum in 2021 before canceling the deal. Given that the two businesses overlap to a significant extent, it's reasonable to think that Lumentum is seeing some of the same industry pressures.
Investors won't have to wait long for Lumentum to provide its own performance updates and guidance. The company is scheduled to announce its own fourth-quarter results before the market opens tomorrow.
