(ADTN) ADTRAN Delivers Mixed Results

ADTRAN Inc.’s (ADTN) fourth quarter 2011 adjusted earnings of 50 cents per share were well ahead of the Zacks Consensus Estimate of 46 cents but plunged 14.2% from the year-ago earnings of 56 cents. Adjusted earnings for the full-year 2011 grew 18.6% to $2.16 from $1.82 a year ago.

Adjusted earnings for the fourth quarter and fiscal 2011 exclude a negative impact of 2 cents and 4 cents, respectively; pertaining to acquisition related expenses.

Net income decreased 13.3% to $31.2 million from $36 million in the year-ago quarter. However, in fiscal 2011, net profit increased 21.6% to $138.6 million. Similar to management’s previous expectation net income remained impacted by higher services-related revenue that carry lower margin and increase in costs related to customer acquisitions

For the fourth quarter, total revenue climbed 6.0% year over year to $175.3 million, but failed to surpass the Zacks Consensus Estimate of $177 million.  For fiscal 2011, revenue increased 18.4% year over year to $717.2 million. The year-over-year upside was attributable to strong growth in the company’s three growth products –– Broadband Access, Internetworking and Optical Access.


ADTRAN exited fiscal 2011 with cash and cash equivalents of $42.9 million compared with $31.8 million at the end of 2010.

The company maintains a zero debt balance. But its long-term obligations to pay bonds remained unchanged from the third quarter level of $46.5 million.


The company’s Board of Directors declared a cash dividend of 9 cents per share during the reported quarter. The dividend will be paid on February 16 to shareholders of record as of February 2, 2012.

Our Analysis

Although the quarterly results remained impacted by expenses in relation to the proposed acquisition of Nokia Siemens Network’s Fixed Line Broadband Access Business and the already acquired Bluesocket, Inc, we remain encouraged by the company’s annual performance that registered growth based on its three key products. We believe that ADTRAN is well positioned to benefit from the current market dynamics and several new product cycles in broadband access, wireless backhaul products, fiber to the node, Ethernet over copper, optical and enterprise VoIP.

However, in the coming quarters, results may suffer further declines due to significant investment in acquisitions. Further, the bulk of its business is generated from big customers like AT&T (T), Verizon (VZ) and CenturyLink (CTL), which increases business uncertainty. Competitive threats and regulatory issues also remain headwinds for the company.

Consequently, we are maintaining our long-term Neutral recommendation on the stock supported by a Zacks #3 (Hold) Rank.

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