ADTRAN Remains Neutral - Analyst Blog
07 May 2013 - 11:20PM
Zacks
We maintain our long-term Neutral
recommendation on ADTRAN Inc. (ADTN). The company
reported better-than-expected first quarter of 2013 financial
results. Both the top and the bottom line outpaced the Zacks
Consensus Estimate.
Why Keeping at
Neutral?
ADTRAN has performed creditably
despite a challenging business environment. The company is facing
double-edged problems: (1) the communications equipment industry is
currently going through a volatile phase due to uneven capital
spending of telecom carriers, and (2) increasing competitive
pressure within the industry. In the reported quarter, ADTRAN
stabilized its businesses with the U.S. Tier 1 carriers, while
generating contracts from several Tier 2 carriers. The Enterprise
division also generated strong sales of IP gateway and switch
products.Looking ahead, we expect the company to benefit from
market share gain, new product offerings, solid international
sales, and growing service revenues.
Risk/Reward Almost
Balanced
We believe that the organic growth
for the company will be largely based on recovery in spending
pattern of tiered carriers and the Enterprise segment, increased
penetration of TA 5000, professional services at domestic and
international levels, mobile broadband infrastructure upgrades and
funds generated through Broadband Stimulus projects. ADTRAN has
declared that the company has received orders from a Tier 1 telecom
carrier for which shipment will start from the second half of 2013.
Additionally, the company is expecting to generate revenues from a
second Tier 1 carrier in early 2014.
Nevertheless, the market for
broadband access and IP networking equipment is highly competitive.
The company competes with large and well-established networking
OEMs both in the enterprise and carrier market segments.
Competition would further increase if new companies enter the
market or the existing competitors expand their product lines. An
increase in competition will force ADTRAN to reduce its product
prices and market share. Customer concentration is another major
concern for the company.
Other Stocks to
Consider
ADTRAN currently has a Zacks Rank
#3 (Hold). Other stocks in the industry that warrant considerations
include Symmetricon Inc. (SYMM), Calix
Inc. (CALX) and SBA Communications Corp.
(SBAC). While Symmetricon currently has a Zacks Rank #1 (Strong
Buy), both Calix and SBA Communications carry a Zacks Rank #2
(Buy).
ADTRAN INC (ADTN): Free Stock Analysis Report
CALIX INC (CALX): Free Stock Analysis Report
SBA COMM CORP (SBAC): Free Stock Analysis Report
SYMMETRICOM INC (SYMM): Free Stock Analysis Report
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