) witnessed bearish estimate revisions after the third-quarter
2012 earnings announcement on October 24, 2012. The downward
revision in estimates is based on the fact that the company has
lost a significant amount of business from its most important
) which could thereby affect Tellabs financial condition
Third Quarter Recap
On October 24, Tellabs reported its third-quarter 2012
financial results. Quarterly adjusted (excluding special items)
earnings per share came in at a break even, which was in line
with the Zacks Consensus Estimate. On a GAAP basis, net loss in
the third quarter of 2012 was $4 million or a loss of 1 cent per
share compared with a net loss of $130 million or 36 cents per
share in the prior-year quarter.
Tellabs generated total revenue of $264.4 million, down 19.8%
year over year and also below the Zacks Consensus Estimate of
$277 million. Quarterly GAAP gross margin was 39.2% compared with
41.3% in the year-ago quarter. Operating expenses, in the
thirdquarter, were $105.7 million compared with $268 million in
the prior-year quarter.
Agreement of Estimate Revisions
In the last 7 days, out of total 7 estimates, there were no
revisions in either direction for the third quarter of 2012.
Similarly, for the fourth quarter, out of total 6 estimates, no
revisions were witnessed over the same time frame.
Out of total 7 estimates, six went down while none moved up
for the third quarter over the last one month. For the fourth
quarter, four out of 6 estimates moved south while none moved
north over the same time period.
For 2012, none of the estimates witnessed any movement in the
past one week. A similar picture could be seen for 2013, where
out of the total 6 estimates, no estimate revisions were observed
over the same time period.
In the last 30 days, five out of total 7 estimates were
revised downward while only one estimate moved in the opposite
direction for 2012. The bearish momentum continues in 2013, where
out of the total 7 estimates, six moved south over the same time
Magnitude of Estimate Revisions
Over the last 7 days, the current Zacks Consensus Estimate
remained flat for the third and fourth quarter of 2012. Over the
last 30 days, the current Zacks Consensus Estimate has
deteriorated by 3 cents to a loss of 2 cents for the third
quarter of 2012, while it decreased by 2 cents for the fourth
Over the last 7 days, the current Zacks Consensus Estimate has
remained static for 2012 and 2013 at a loss of 6 cents. On the
contrary, over the last 30 days, the current Zacks Consensus
Estimate has deteriorated by 2 cents for 2012, while it
diminished by 4 cents to a loss of 6 cents for 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 the company's
margins going forward. Meanwhile, the increasing competition in
its core wireless backhaul solutions segment raises our concern.
Moreover, Tellabs' globally reputed high-margin digital
cross-connect products continued to show a downtrend.
We, thus, maintain our long-term Neutral recommendation for
Tellabs Inc. Currently, the company retains a Zacks #3 Rank,
implying a short-term Hold rating on the stock.
About Earnings Estimate Scorecard
Len Zacks, PhD in mathematics from MIT, proved over 30 years
ago that earnings estimate revisions are the most powerful force
impacting stock prices. He turned this ground breaking discovery
into two of the most celebrating stock rating systems in use
today. The Zacks Rank for stock trading in a 1 to 3 month time
horizon and the Zacks Recommendation for long-term investing (6+
months). These "Earnings Estimate Scorecard" articles help
analyze the important aspects of estimate revisions for each
stock after their quarterly earnings announcements. Learn more
about earnings estimates and our proven stock ratings at:
AT&T INC (T): Free Stock Analysis Report
TELLABS INC (TLAB): Free Stock Analysis
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