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Adtran (ADTN) Up 5.8% Since Last Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for Adtran (ADTN). Shares have added about 5.8% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Adtran due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

ADTRAN Misses Earnings & Revenue Estimates in Q3

ADTRAN reported unimpressive third-quarter 2021 results, wherein both the bottom and the top lines missed the Zacks Consensus Estimate.

Net Loss

On a GAAP basis, net loss in the September quarter was $10.4 million or a loss of 21 cents per share against a net income of $5.5 million or 11 cents per share in the prior-year quarter. The deterioration was due to an operating loss, net investment loss, and higher income tax.

Non-GAAP net loss was $0.8 million or a loss of 2 cents per share against a net income of $7.9 million or 16 cents per share in the year-ago quarter. The bottom line missed the Zacks Consensus Estimate of earnings of 10 cents.

Revenues

Quarterly total revenues grew to $138.1 million from $133.1 million in the prior-year quarter, driven by the increasing demand for ADTRAN’s network solutions. The top line, however, missed the consensus estimate of $144 million.

The company is experiencing solid demand, underscored by its record-setting bookings in the quarter, which is up 43% year over year. It continues to add customers, including three new Tier 1 operators since the beginning of the third quarter. ADTRAN also witnessed a 61% year-over-year growth rate in customers deploying its Software-as-a-Service applications.

Revenues from Network Solutions were $120.8 million compared with $115.2 million in the year-ago quarter. ADTRAN’s end-to-end solutions simplify the deployment of fiber-based broadband services and provide a better customer experience. Services and Support revenues were $17.3 million, down from $17.9 million.

Other Details

The total cost of sales increased from $74.2 million to $90.4 million. Gross profit came in at $47.7 million compared with $59 million in the prior-year quarter. Operating loss in the quarter was $10.1 million against an operating income of $4.5 million in the year-ago quarter.

ADTRAN announced that its board of directors approved a cash dividend of 9 cents per share for the third quarter of 2021. The amount is payable on Nov 30 to shareholders on record as of Nov 16.

Cash Flow & Liquidity

During the first nine months of 2021, ADTRAN generated $28.9 million of cash from operating activities against cash utilization of $5.3 million in the prior-year period. As of Sep 30, 2021, the company had $75.5 million in cash and cash equivalents with $28.3 million of deferred compensation liability.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month. The consensus estimate has shifted -191.67% due to these changes.

VGM Scores

At this time, Adtran has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, Adtran has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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