ADTRAN Disappoints in 1Q - Analyst Blog

By Zacks Equity Research,

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ADTRAN Inc. ( ADTN ) reported first quarter 2012 adjusted earnings of 25 cents per share, in line with the Zacks Consensus Estimate but significantly below the 55 cents earned a year ago.

As feared by the company, expansion plans, acquisition expenses and increased overseas activities affected the earnings results. ADTRAN's earnings were hurt by expenses related to the acquisition of Bluesocket Inc. and the planned purchase of the Nokia Siemens Network's fixed-line Broadband Access business. In addition, stock-based compensation also constrained earnings.

Net profit plunged 64.5% to $16.2 million from $45.6 million in the year-ago quarter.                                               

Revenue dropped 18.6% year over year to $134.7 million and missed the Zacks Consensus Estimate of $137 million.

ADTRAN saw lackluster sales given the weak spending pattern of customers that in turn weighed on its overall revenue. Lower carrier infrastructure spending by Tier 1 carriers like Verizon Communications ( VZ ) and AT&T Inc. ( T ) also resulted in the continued decline in revenue. Additionally, the company's traditional products, mainly HDSL continued declining with increased market traction in Ethernet and fiber-based platforms.


ADTRAN exited the first quarter with cash and cash equivalents of $36.5 million compared with $43.0 million at the end of fiscal 2011.

The company's long-term obligations to pay bonds remained unchanged from fiscal 2011 at $46.5 million. 


The company's board of directors declared a cash dividend of 9 cents per share for the quarter. The dividend will be paid on May 10 to shareholders of record as of April 26.

Our Analysis

We believe that the acquisition of Nokia Siemens Networks' fixed-line Broadband Access business would continue to weigh on ADTRAN's earnings performance this year given its weaker existing market shares. Further, declining performance of the company's traditional product line, HDSL, lower spending by Tier 1 carriers and its heavy reliance on its key customers along with regulatory issues in the telecommunication industry contribute to our negative stance on the company.

Consequently, we have a long-term Underperform rating on ADTRAN supported by a short-term (1-3 months) Zacks #4 Rank (Sell).

ADTRAN INC ( ADTN ): Free Stock Analysis Report
AT&T INC ( T ): Free Stock Analysis Report
VERIZON COMM ( VZ ): Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Stocks
Referenced Stocks: ADTN , T , VZ

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