Earnings Preview: Tellabs Inc.
) is slated to release its third-quarter 2012 results on
Wednesday, October 24, after the closing bell. The current Zacks
Consensus Estimate for the third quarter stands at break even,
representing a growth of 66.67% from the year-ago quarter.
With respect to earnings surprise, Tellabs has outperformed
the Zacks Consensus Estimate in three out of the last four
quarters with an average beat of 66.67%.
On July 26, 2012, TLAB declared its financial results for the
second quarter of fiscal 2012 beating the Zacks Consensus
Estimates. Quarterly GAAP net loss was approximately $5.0 million
or 1 cent per share compared with a net loss of $29.0 million or
8 cents per share in the year-ago quarter. Second-quarter 2012
earnings per share came at break even, which was better than the
Zacks Consensus Estimate by a penny.
Net revenue in the reported quarter was $288.1 million, down
9% year over year and exactly in line with the Zacks Consensus
Estimate. All the four reporting segments of Tellabs witnessed
declines in year-over-year sales.
Gross margin in the reported quarter was 39.6% compared with
36.4% in the year-ago quarter. Operating expenses, in the second
quarter, were $112.6 million compared with $150.4 million in the
Agreement of Estimate Revisions
In the last 30 days, out of 6 estimates there were no estimate
revisions in either direction for the third and fourth quarter of
2012. Likewise, out of 6 estimates there were no revisions in
either direction for 2012 and 2013 over the same time frame.
Magnitude of Estimate Revisions
Over the last 30 days, the Zacks Consensus Estimates have
remained unchanged for the third and fourth quarter of 2012.
Similarly, the estimates haven't moved in either direction for
2012 and 2013.
Tellabs is aggressively targeting the booming mobile Internet
markets since its legacy switching products are losing relevance.
We believe, management's strategic decision to thoroughly
restructure its business model by emphasizing on mobile backhaul
solution, IP-packet optical solution coupled with its massive
headcount reduction and consolidation of research and development
facilities will lead to further improvement in margins going
forward. However, our major concern for Tellabs is the increasing
competition in its core wireless backhaul solutions segment. The
company has already lost a significant amount of business from
its most important customer
), which could have severe consequences on Tellabs' financial
condition in 2012.
We are maintaining our long-term Neutral recommendation on
Tellabs. The company also holds a Zacks #3 Rank, implying a
short-term Hold rating on the stock.
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