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Following the second-quarter 2012 earnings announcement on July 26, 2012, the analysts covering Tellabs Inc. have neither increased nor decreased the EPS estimates.

First Quarter Highlights

On a GAAP basis, net loss in the second quarter of 2012 was $5.0 million or a loss of $0.01 per share compared with a net loss of $29.0 million or $0.08 per share in the prior-year quarter.

However, adjusted (excluding special items) earnings per share in the reported quarter came in at $0.01, better than the Zacks Consensus Estimate of a loss of $0.01. Quarterly total revenue of $288.1 million was down 9% year over year, and exactly in line with the Zacks Consensus Estimate.

Quarterly GAAP gross margin was 39.6% compared with 36.4% in the year-ago quarter. Quarterly operating margin was 0.6% as opposed to a negative 11.1% in the year-ago quarter.

Agreements of Analysts

Of the six analysts covering the stock in the last 7 days, none have revised the estimates for the third and fourth quarter of fiscal 2012. Likewise, for fiscal 2012 and 2013, in the last 7 days, out of the six analysts covering the stock, none have revised the estimates upward or downward.

Currently, the Zacks Consensus EPS Estimate for the third quarter of fiscal 2012 is pegged at breakeven. The projected annual growth is 66.67%. Similarly, for the fourth quarter of 2012, the current Zacks Consensus EPS Estimate of 1 cent indicates a year-over-year growth of 166.67%.

Magnitude of Estimate Revisions

During the last 7 days, the current Zacks Consensus Estimate for the third quarter of 2012 were at breakeven with the previous Zacks Consensus Estimate. Likewise, for fiscal 2012, the current Zacks Consensus Estimate was at par with the earlier estimate of a loss of 4 cents per share. However, for fiscal 2013, in the last 7 days, the current Zacks Consensus Estimate was in line with the previous estimate of 2 cents.

Earning Surprises

Tellabs produced an earnings surprise of 1 cent or 200% in the last quarter with an average earnings surprise of 66.67% in the trailing four quarters. There are upside potentials (essentially a proxy for future earning surprises) of 0.00% for the ongoing quarter and the next quarter. However, for fiscal 2012, the Zacks Consensus Estimates downside potential is 0.00% while 2013 contains a downside risk of 50.00%.

Our Recommendation

Despite healthy balance sheet and slightly better financial results, our major concern for Tellabs is the increasing competition in its core wireless backhaul solutions segment. Tellabs already lost a significant amount of business from its most important customer AT&T (T - Analyst Report).

Moreover, Tellabs’ globally reputed high-margin digital cross-connect products continued to show a downtrend. We, thus, maintain our long-term Neutral recommendation for Tellabs.

Currently, Tellabs has a Zacks #3 Rank, implying a short-term Hold rating on the stock.

About Earnings Estimate Scorecard

Len Zacks, PhD from MIT, proved over 30 years ago that earnings estimate revisions are the most powerful force impacting stock prices. He turned this groundbreaking discovery into two of the most celebrating stock rating systems in use today. The Zacks Rank for stock trading in a 1 to 3 month time horizon and the Zacks Recommendation for long-term investing (6+ months). These “Earnings Estimate Scorecard” articles help analyze the important aspects of estimate revisions for each stock after their quarterly earnings announcements. Learn more about earnings estimates and our proven stock ratings at: http://www.zacks.com/education/

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