) reported third quarter 2012 adjusted earnings of 20 cents per
share, beating the Zacks Consensus Estimate of 16 cents. However,
this compares unfavorably with the year-ago adjusted earnings of 56
Adjusted earnings per share for the quarter excluded the impact
of 2 cents in expenses, amortizations and adjustments related to
the acquisitions of Nokia Siemens Network's Broadband Access (NSN)
business. It also excludes negative impacts of 3 cents related to
stock-based compensation expenses.
Although the company's earnings came in line with its revised
estimate provided in the beginning of the month, it still remained
impacted by market uncertainties. ADTRAN's earnings continue to be
affected by the weak spending pattern of its customers and
declining business of its traditional product lines, mainly
The company reported quarterly revenues of $162 million, missed
the Zacks Consensus Estimate of $189 million and plummeted 15.6%
year over year.
Operating income registered a steep drop of 80% year over year
to $10.3 million while operating expenses grew 19.3% year over year
to $69.7 million.
ADTRAN exited the reported quarter with cash and cash
equivalents of $43.5 million compared with $32.5 million at the end
of the year-ago quarter.
The company's long-term obligations to pay bonds remained
unchanged from the second quarter of 2012 at $46.5
The company's board of directors declared a cash dividend of 9
cents per share for the quarter. The dividend will be paid on
November 8 to shareholders of record as of October 25.
Despite the company's current market dynamics, we foresee
long-term growth based on its three key growth products, several
new product cycles in broadband access, wireless backhaul products,
fiber to the node, Ethernet over copper, optical and enterprise
VoIP. In addition, we believe the company's recent acquisitions
will also support its market expansion in the broadband access
However, in the near-term the stock is expected to perform
lackluster unless there is a turn around in its customers' spending
pattern. Its heavy reliance on its key customers - such as
) - will continue to weigh over its earnings unless substantial new
contract wins take place.
We are maintaining our long-term Neutral recommendation on
ADTRAN. However, the stock has a Zacks #5 Rank, implying a
short-term Strong Sell rating.
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