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ADTRAN Research Report Updated

Zacks Equity Research

On Apr 30, 2014, we issued an updated research report on ADTRAN Inc. (ADTN). The first quarter 2014 financial results were supported by an improved spending atmosphere and increased strategic investments by its carrier and enterprise customers. Also, the company’s international business generated strong revenues.

ADTRAN has delivered positive earnings surprises in all four quarters last year, with an average beat of 28.58%. The company reported mixed financial results for the first quarter of 2014 with the bottom line beating the Zacks Consensus Estimate but the top line missing the same.

Meanwhile, the company continues to perform well owing to strong contributions from the U.S., Europe, the Middle East, Africa and Latin America. ADTRAN has stabilized its businesses with Tier 1 carriers and has also won contracts from Tier 2 and Tier 3 carriers. We expect the company to benefit from market share gains, strong growth of core products, solid international sales and growing service revenues.  

Within Broadband Access, ADTRAN is positioned to benefit from the continued strong momentum of TA 5000 and FTTN platforms owing to the network upgrade to Ethernet mostly by Tier 2 and Tier 3 carriers as well as higher broadband stimulus. Internetworking is expected to benefit from an increase in dealer base, aiding market share gains, new products supporting unified communications, an amplified distribution channel and improving end-market demand.

However, ADTRAN’s products must comply with various regulations and standards defined by the Federal Communications Commission and Underwriters Laboratories. Products sold internationally may be required to comply with regulations or standards established by telecommunications authorities in various countries, as well as those of certain international bodies. Thus, the cost of complying with the evolving standards and regulations, or the failure to obtain domestic or foreign regulatory approvals timely may affect the company’s operations and financial condition.

Further, global macroeconomic fluctuations, foreign currency risk and stiff competition may act as headwinds for ADTRAN moving ahead. Moreover, the stock price is currently trading at the high-end of its 52-week price range and is fairly valued at current levels.

ADTRAN currently carries a Zacks Rank #3 (Hold).

Stocks That Warrant a Look

Other stocks worth considering in this sector include CommScope Holding Company, Inc. (COMM), SeaChange International Inc. (SEAC) and Harmonic Inc. (HLIT). All three carry a Zacks Rank #2 (Buy).

Read the Full Research Report on ADTN
Read the Full Research Report on COMM
Read the Full Research Report on HLIT
Read the Full Research Report on SEAC

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