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Why Is ADTRAN Holdings (ADTN) Up 12.1% Since Last Earnings Report?
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A month has gone by since the last earnings report for ADTRAN Holdings (ADTN - Free Report) . Shares have added about 12.1% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is ADTRAN Holdings due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
ADTRAN's Q3 Earnings Miss Estimates on Lower Revenues
ADTRAN reported soft second-quarter 2023 results, wherein both the bottom line and the top line missed the respective Zacks Consensus Estimate owing to a challenging macroeconomic environment. However, revenues increased significantly on a year-over-year basis.
Net Income
On a GAAP basis, net loss in the June quarter was $33.3 million or a loss of 43 cents per share against net income of $2.1 million or 4 cents per share in the prior-year quarter. The year-over-year decline despite top-line growth and income tax benefit was primarily due to higher cost of revenues and operating expenses. Non-GAAP net loss was $0.08 million or breakeven, which missed the Zacks Consensus Estimate by a penny.
Revenues
Quarterly total revenues surged to $327.4 million from $172 million in the prior-year quarter, driven by the increasing demand for ADTRAN’s network solutions and fiber broadband products. The top line missed the consensus estimate of $330 million.
Revenues from Network Solutions in the reported quarter were $283 million compared with $156 million in the year-ago quarter, with incremental contribution from ADVA. ADTRAN completed the buyout of ADVA in July 2022. The company recorded healthy demand trends, driven by the accelerated expansion of fiber-to-the-home networks, upgrades to in-home Wi-Fi connectivity and the adoption of cloud-based automation tools. The top line was further buoyed by improved customer diversification and end-to-end fiber broadband solutions. Services and Support revenues were $44.4 million, up from $16 million.
Other Details
Total cost of sales increased from $109.5 million to $234.8 million. GAAP gross profit came in at $92.6 million compared with $62.5 million in the prior-year quarter. Operating loss in the quarter was $44.6 million against an operating income of $8.1 million in the year-ago quarter.
Cash Flow & Liquidity
In the first six months of 2023, ADTRAN used $36.2 million of cash for operating activities compared with a cash utilization of $5.9 million in the prior-year period. As of Jun 30, 2023, the company had $124.3 million in cash and cash equivalents with $44.6 million of deferred compensation liability.
Moving Forward
ADTRAN expects the second half of 2023 to remain challenging as customers continue to optimize their inventory levels amid uncertain business conditions. Nevertheless, management remains bullish about the long-term earnings growth prospects of the company.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
The consensus estimate has shifted -27.78% due to these changes.
VGM Scores
At this time, ADTRAN Holdings has a poor Growth Score of F, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise ADTRAN Holdings has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
Performance of an Industry Player
ADTRAN Holdings is part of the Zacks Technology Services industry. Over the past month, Seagate (STX - Free Report) , a stock from the same industry, has gained 8.6%. The company reported its results for the quarter ended September 2023 more than a month ago.
Seagate reported revenues of $1.45 billion in the last reported quarter, representing a year-over-year change of -28.6%. EPS of -$0.22 for the same period compares with $0.48 a year ago.
For the current quarter, Seagate is expected to post a loss of $0.10 per share, indicating a change of -162.5% from the year-ago quarter. The Zacks Consensus Estimate has changed -3.5% over the last 30 days.
Seagate has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of C.
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Why Is ADTRAN Holdings (ADTN) Up 12.1% Since Last Earnings Report?
A month has gone by since the last earnings report for ADTRAN Holdings (ADTN - Free Report) . Shares have added about 12.1% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is ADTRAN Holdings due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
ADTRAN's Q3 Earnings Miss Estimates on Lower Revenues
ADTRAN reported soft second-quarter 2023 results, wherein both the bottom line and the top line missed the respective Zacks Consensus Estimate owing to a challenging macroeconomic environment. However, revenues increased significantly on a year-over-year basis.
Net Income
On a GAAP basis, net loss in the June quarter was $33.3 million or a loss of 43 cents per share against net income of $2.1 million or 4 cents per share in the prior-year quarter. The year-over-year decline despite top-line growth and income tax benefit was primarily due to higher cost of revenues and operating expenses. Non-GAAP net loss was $0.08 million or breakeven, which missed the Zacks Consensus Estimate by a penny.
Revenues
Quarterly total revenues surged to $327.4 million from $172 million in the prior-year quarter, driven by the increasing demand for ADTRAN’s network solutions and fiber broadband products. The top line missed the consensus estimate of $330 million.
Revenues from Network Solutions in the reported quarter were $283 million compared with $156 million in the year-ago quarter, with incremental contribution from ADVA. ADTRAN completed the buyout of ADVA in July 2022. The company recorded healthy demand trends, driven by the accelerated expansion of fiber-to-the-home networks, upgrades to in-home Wi-Fi connectivity and the adoption of cloud-based automation tools. The top line was further buoyed by improved customer diversification and end-to-end fiber broadband solutions. Services and Support revenues were $44.4 million, up from $16 million.
Other Details
Total cost of sales increased from $109.5 million to $234.8 million. GAAP gross profit came in at $92.6 million compared with $62.5 million in the prior-year quarter. Operating loss in the quarter was $44.6 million against an operating income of $8.1 million in the year-ago quarter.
Cash Flow & Liquidity
In the first six months of 2023, ADTRAN used $36.2 million of cash for operating activities compared with a cash utilization of $5.9 million in the prior-year period. As of Jun 30, 2023, the company had $124.3 million in cash and cash equivalents with $44.6 million of deferred compensation liability.
Moving Forward
ADTRAN expects the second half of 2023 to remain challenging as customers continue to optimize their inventory levels amid uncertain business conditions. Nevertheless, management remains bullish about the long-term earnings growth prospects of the company.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
The consensus estimate has shifted -27.78% due to these changes.
VGM Scores
At this time, ADTRAN Holdings has a poor Growth Score of F, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise ADTRAN Holdings has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
Performance of an Industry Player
ADTRAN Holdings is part of the Zacks Technology Services industry. Over the past month, Seagate (STX - Free Report) , a stock from the same industry, has gained 8.6%. The company reported its results for the quarter ended September 2023 more than a month ago.
Seagate reported revenues of $1.45 billion in the last reported quarter, representing a year-over-year change of -28.6%. EPS of -$0.22 for the same period compares with $0.48 a year ago.
For the current quarter, Seagate is expected to post a loss of $0.10 per share, indicating a change of -162.5% from the year-ago quarter. The Zacks Consensus Estimate has changed -3.5% over the last 30 days.
Seagate has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of C.