Communication network solution provider
) reported better-than-expected fourth quarter and full year 2012
results, owing to strong contributions from the carrier and
enterprise divisions. The results were, however, partially offset
by market uncertainties and subdued spending by customers.
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Quarterly adjusted earnings of 11 cents per share, comfortably
beat the Zacks Consensus Estimate of 7 cents. However, this
compares unfavorably with the year-ago adjusted earnings of 54
Adjusted earnings per share for the quarter exclude the impact of
2 cents in expenses, amortizations and adjustments related to
acquisitions. The figure also excludes the negative impact of 3
cents related to stock-based compensation expenses.
The company reported quarterly revenues of $139.8 million, in
line with the Zacks Consensus Estimate but down 20.3% year over
Operating income registered a steep drop of 93.0% year over year
to $2.9 million despite operating expenses declining 4.9% year
over year to $72.4 million.
For the full year, the company posted earnings of 94 cents per
share (ahead of our projection by 28.8% but down 58.8% year over
year), on revenue of $620.6 million (down 13.5% from the prior
Operating income came in at $56.2 million, reflecting a
year-over-year decline of 70.3%. Operating expenses remained flat
at $304.0 million.
ADTRAN exited 2012 with cash and cash equivalents of $68.5
million compared with $43.0 million at the end of 2011. As of Dec
31, 2012, the company's long-term obligations to pay bonds
remained at $46.0 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 Feb
21 to shareholders of record as of Feb 7.
We are maintaining our long-term Underperform recommendation on
ADTRAN. The stock has a Zacks Rank #4, implying a short-term Sell
Looking ahead, we expect ADTRAN's revenue and earnings level to
be under pressure due to weak performances by the company's
traditional products - mainly HDSL. Regulatory factors,
heavy reliance on its key customers such as
) as well as high spending on expansion could also restrict the
company's revenue stream and profitability.