ADTRAN Inc.’s (ADTN) third quarter 2011 earnings of 56 cents per share were level with the Zacks Consensus Estimate and above 50 cents earned a year ago. Strong sales backed the year-over-year improvement.
Net profit shot up 12.9% to $36.2 million from $32.1 million in the year-ago quarter.
Revenue climbed 18.0% year over year to $192.2 million and was way ahead of the Zacks Consensus Estimate of $189 million. Stellar performances by the three main growth products –– Broadband Access, Internetworking and Optical Access –– led to its sixth consecutive quarterly revenue record.
Broadband Access shot up 93% year over year, driven by the continued adoption of total access 5000 and fiber-to-the-node platforms. Internetworking products grew 44% aided channel expansion and new product offerings. Optical Access increased 20% on higher mobile data demand.
Liquidity
ADTRAN exited the third quarter with cash and cash equivalents of $32.5 million compared with $26.1 million at the end of third quarter 2010.
The company maintains zero debt balance. But its long-term obligations to pay bonds remained unchanged from sequentially at $46.5 million.
Dividend
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 10 to shareholders of record on October 27.
Share Repurchase
The company’s board of directors declared a 5-million share repurchase program. The new plan will begin after the company buys back 0.87 million shares remaining under the plan announced in April 2008.
Our Analysis
We believe ADTRAN is well positioned to benefit from the current market dynamics. Additionally, the company’s three key products lines have registered continued revenue highs. The company is also benefiting from several new product cycles in broadband access, wireless backhaul products, fiber to the node, Ethernet over copper, optical and enterprise VoIP.
However, competitive threats, regulations and customer concentration may limit the company’s growth. ADTRAN generates the majority of its revenue from big customers such as AT&T Inc. (T), Verizon Communications (VZ) and Qwest Communications. The Qwest-Century Link Inc. (CTL) merger can have adverse effects on ADTRAN’s revenue growth thereby restricting its profitability.
Consequently, we are maintaining our long-term Neutral recommendation on the stock supported by a Zacks #3 Rank (Hold).
ADTRAN INC (ADTN): Free Stock Analysis Report
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