ADTRAN (ADTN) To Report Q2 Earnings: What's In The Offing?

ADTRAN, Inc. (NASDAQ:ADTN) is scheduled to report second-quarter 2019 financial results on Jul 17, after the closing bell. In the last reported quarter, the company delivered a positive earnings surprise of 300%.

The networking equipment maker is likely to report higher year-over-year revenues on the back of diversification across geographies and markets. Whether this can result into an earnings beat remains to be seen.

Let’s find out how things are shaping up prior to the announcement.

Factors at Play

ADTRAN is well positioned to drive its business supported by material contributions across the LATAM, EMEA, North America, and Pacific Rim regions. The company’s broad portfolio of next-generation solutions continues to gain market traction with a growing number of customers in an expanding range of market segments.

During the second quarter, ADTRAN inked an agreement with ATC Communications — a family-owned rural local exchange carrier in Central Nebraska — to offer its SmartRG network management solution to improve the broadband connectivity of the latter. This end-to-end device management and analytics tools solution is expected to improve subscriber experience and resolution time, thereby strengthening ADTRAN’s position as a leading provider of open networking solutions.

Furthermore, the company should experience incremental benefit from its deal with Zzoomm — a fiber network operator. In March 2019, ADTRAN was chosen by Zzoomm as its technology partner to build a 10G fiber to the home network that serves suburbs and towns across the United Kingdom. Zzoomm announced plans to begin construction of a full fiber network that would connect one million properties over the next five years. The operator leveraged the ADTRAN 10G fiber access platform with XGS-PON to support an economical, symmetric 10Gbps service delivery solution at competitive broadband price points.

ADTRAN’s deal underscores that the market is choosing 10G PON technology over the previous fiber-to-the-premises solutions deployed over the past decades. The company is optimizing its customer, geographic and product diversity momentum as service providers aim to boost speed and scale network capabilities. It expects short-term headwinds to gradually recede with increased customer engagements across its comprehensive portfolio of software-defined access, 10G solutions and G.fast products.

ADTRAN expects revenues in the second quarter between $154 million and $158 million. After taking into account the potential effect of currency exchange rates and anticipated mix, it expects non-GAAP gross margin in the low 40s. It anticipates consolidated tax rate on a non-GAAP basis in the high 20s to 30% due to increased income and restructuring charges in its European operations.

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For the second quarter, the Zacks Consensus Estimate for sales stands at $156 million. ADTRAN reported $128 million of sales in the year-earlier quarter. Adjusted earnings per share are pegged at 6 cents. The company reported adjusted loss of 10 cents a year ago.

What Our Model Says

Our proven model does not conclusively show that ADTRAN is likely to beat earnings this quarter as it does not possess one of the two key components. A stock needs to have both a positive Original post

Written By: Zacks Investment Research