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Adtran (ADTN) Surges 7.2%: Is This an Indication of Further Gains?

Adtran ADTN shares rallied 7.2% in the last trading session to close at $20.16. This move can be attributable to notable volume with a higher number of shares being traded than in a typical session. This compares to the stock's 2.3% loss over the past four weeks.

The increase in share price can be attributed to the company’s recent announcement of obtaining a foreign direct investment approval from the German Ministry for Economic Affairs and Climate Action (Bundesministerium für Wirtschaft und Klimaschutz, BMWK) for the transaction between ADTRAN and ADVA Optical Networking SE. The transaction will now move to the completion phase as all required offer conditions of the exchange offer have been fulfilled.

In August 2021, the proposed business combination between the two companies was announced. In January 2022, ADTRAN’s shareholders approved the business combination with ADVA Optical Networking SE by an overwhelming majority.

The transaction aims to leverage ADTRAN’s expertise in fiber access, fiber extension and subscriber connectivity solutions with ADVA’s global leadership in metro wavelength division multiplexing, data center interconnect, business Ethernet and network synchronization solutions to create a comprehensive portfolio of fiber networking products. The combined entity is expected to generate significant pre-tax annual cost synergies within the first two years of operation, driven by supply chain efficiencies and optimization of resources.

This networking equipment maker is expected to post quarterly earnings of $0.12 per share in its upcoming report, which represents a year-over-year change of -25%. Revenues are expected to be $170 million, up 18.7% from the year-ago quarter.

While earnings and revenue growth expectations are important in evaluating the potential strength in a stock, empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements.

For Adtran, the consensus EPS estimate for the quarter has remained unchanged over the last 30 days. And a stock's price usually doesn't keep moving higher in the absence of any trend in earnings estimate revisions. So, make sure to keep an eye on ADTN going forward to see if this recent jump can turn into more strength down the road.

The stock currently carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks Rank #1 (Strong Buy) stocks here >>>>

Adtran belongs to the Zacks Communication - Infrastructure industry. Another stock from the same industry, CommScope (COMM), closed the last trading session 3.4% higher at $6.34. Over the past month, COMM has returned -29.3%.

CommScope's consensus EPS estimate for the upcoming report has changed -0.8% over the past month to $0.33. Compared to the company's year-ago EPS, this represents a change of -23.3%. CommScope currently boasts a Zacks Rank of #3 (Hold).

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