Shares of ADTRAN Inc. (ADTN) have tumbled more than 7% since it lowered its earnings and revenue estimates for the upcoming third quarter. The communication network solution provider is slated to report its third-quarter financial numbers on Oct 15, 2014.
The company now expects third-quarter revenues in the range of $162.0 million to $163.0 million, which falls short of the Zacks Consensus Estimate of $174 million. Previously, the company had estimated revenues for the quarter to be flat or marginally up on a sequential basis. In the second quarter of 2014, the company had reported total revenue of $176.1 million, up 8.6% year over year and almost on par with the Zacks Consensus Estimate of $176 million.
Further, ADTRAN believes GAAP earnings will range from 19–20 cents per share, whereas non-GAAP earnings are expected to reach 23–24 cents. However, the Zacks Consensus Estimate for adjusted earnings per share is pegged at 23 cents.
Per management, ADTRAN hopes to witness sequential increase in domestic carrier business. However, this increase will likely be overshadowed by weaker-than-expected growth in business in the European region and a soft enterprise-spending atmosphere.
ADTRAN, however, expects improvement in results from the beginning of 2015 as the company forecasts re-acceleration in carrier expenditure both in the U.S and Europe.
The company is currently facing considerable volatility in its business owing to irregular capital spending by telecom carriers. Moreover, ADTRAN’s international business is largely exposed to currency fluctuations and exchange rate risks. Ongoing mergers and acquisitions in the telecom and cable sector may further result in customer churn for the company.
ADTRAN currently carries a Zacks Rank #4 (Sell).
Stocks that Warrant a Look
Some better-ranked stocks worth considering in this sector are Crown Castle International Corp. (CCI), Calix Inc. (CALX) and Aruba Networks, Inc. (ARUN). All three carry a Zacks Rank #2 (Buy).
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