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ADTRAN (ADTN) Down 9.4% Since Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for ADTRAN, Inc. (ADTN - Free Report) . Shares have lost about 9.4% in that time frame.

Will the recent negative trend continue leading up to its next earnings release, or is ADTN due for a breakout? 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 Q1 Loss Wider Than Expected on Revenue Decline

ADTRAN reported lackluster first-quarter 2018 results with both the top line and bottom line missing the respective Zacks Consensus Estimate.

GAAP loss for the quarter was $9.1 million or loss of 19 cents per share against earnings of $6.7 million or 14 cents per share in the year-ago quarter. Excluding non-recurring items, non-GAAP loss for the reported quarter was 29 cents per share against earnings of 18 cents in the year-earlier quarter and was wider than the Zacks Consensus Estimate of a loss of 15 cents. The significant decline was primarily attributable to slowdown in the spending at a domestic Tier 1 customer (resulting in lower product volumes), high restructuring expenses and a merger-related review.

Total revenues for the first quarter were $120.8 million compared with $170.3 million in the prior-year quarter. Also, the top line missed the Zacks Consensus Estimate of $126 million. Sales at both the segments, namely Product and Service, decreased 26.7% and 41.6%, respectively, on a year-over-year basis to $105.3 million and $15.6 million.

Quarterly gross margin came in at 32.9% compared with 43.3% in the prior-year period. Operating loss in the reported quarter totaled $26.6 million against operating income of $6.9 million in the year-ago quarter.

Cash flow from operating activities totaled $46.2 million compared with $9 million in the year-ago period. ADTRAN exited the quarter with cash and cash equivalents of $82.6 million. The company maintained its dividend of 9 cents per share for the quarter.

Moving forward, ADTRAN expects improved performance in the coming quarters with continued strength in the European business and a rebound in its North American business in the second half. The company also expects to benefit from the acquisition of the EPON business from Sumitomo Electric Industries Ltd, a leading global provider of next-generation optical broadband access network solutions in Asia and North America.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. There have been two revisions lower for the current quarter.

ADTRAN, Inc. Price and Consensus

 

ADTRAN, Inc. Price and Consensus | ADTRAN, Inc. Quote

VGM Scores

At this time, ADTN has a nice Growth Score of B, a grade with the same score on the momentum front. The stock was also allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Based on our scores, the stock is equally suitable for value, growth and momentum investors.

Outlook

Estimates have been broadly trending downward for the stock and the magnitude of these revisions indicates a downward shift. It's no surprise ADTN has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.




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