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As of Oct 25, we maintain our Neutral recommendation on ADTRAN Inc. (ADTN - Analyst Report) based on the company’s strong third-quarter 2013 financial results. Both the top and the bottom line outpaced the Zacks Consensus Estimate in the recently concluded third quarter of fiscal 2014.

Why the Reiteration?

ADTRAN continues to perform creditably despite a challenging business environment. Increased penetration of TA 5000 platform, professional services at domestic and international levels, mobile broadband infrastructure upgrades and funds generated through Broadband Stimulus projects will continue to drive its future growth prospect.

ADTRAN continues to perform well owing to solid contributions from its Internetworking and Broadband Access product divisions. The company has stabilized its businesses with Tier 1 carriers and has also won contracts from Tier 2 carriers.

Recently, ADTRAN enhanced its technical services and support program division. The new ProServices platform offers an innovative ProStart installation program, ProCare maintenance program and ProCloud managed networking services. The company also started offering ProCloud Wi-Fi Private Label services in Europe which we believe will not only bolster its new revenue stream but will also lure new customers.

However, a weak macroeconomic spending environment, foreign currency risk and stiff competition from other OEM manufacturers may act as headwinds for the company while moving ahead.  Moreover, the company’s stock has soared 43% over the last one year and is currently trading close to the 52-week high range.

Currently, ADTRAN has a Zacks Rank #3 (Hold).

Other Stocks to Consider

Other stocks in this industry that warrants a look include Harmonic Inc. (HLIT - Snapshot Report), AudioCodes Ltd. (AUDC - Snapshot Report) and Envivio Inc. (ENVI). All three stocks currently carry a Zacks Rank #2 (Buy).

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