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Economic Instability Affects ADTRAN

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Networking and communication equipment manufacturer, ADTRAN Inc.’s (ADTN - Free Report) shares plummeted after the company declared that the volatility in the macroeconomic condition of Europe is hurting its profitability.

ADTRAN’s shares fell $1.74 or almost 7% as the stock closed at $23.47 on Wednesday on Nasdaq. The shares were one of the 10 worst performing stocks on Nasdaq on Wednesday in relative terms.

On Jul 9, 2013, ADTRAN reported better-than-expected second-quarter 2013 financial results, beating the Zacks Consensus Estimate in both the fronts. Strong contributions from the Internetworking and Broadband Access product divisions contributed to the improved results.

Although quarterly total revenue of $162.2 million declined 11.8% annually, ADTRAN outpaced the Zacks Consensus Estimate of $153.0 million. Similarly, the adjusted earnings per share of 18 cents handsomely beat the Zacks Consensus Estimate of 15 cents. However, a 47.6% decline in operating profit was the most notable of the different financial measures.

Huntsville, Ala.-based ADTRAN expects its overall profitability to decline in the third quarter of 2013. Nevertheless, the company presumes that significant carrier network upgrades and a tight cost control effort will allow it to improve its profitability in the fourth quarter of 2013.

Improved carrier spending along with geographic expansion of business could boost ADTRAN’s top line in the coming quarters, which in turn can improve its profitability. Thus, we believe that although the stock has risen more than 21% since the beginning of the year, there is scope for further improvement.

ADTRAN currently has a Zacks Rank #2 (Buy).

Other Stocks to Consider

Other stocks in this industry that warrant a look include Calix Inc. (CALX - Free Report) , Crown Castle International Corp. (CCI - Free Report) and Equinix Inc. (EQIX - Free Report) . All the stocks currently carry a Zacks Rank #2 (Buy).

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