ADTRAN Inc. (ADTN), a global provider of networking and communications equipment, reported first quarter 2011 earnings of 52 cents per share surpassing the Zacks Consensus Estimate of 46 cents. The quarter’s results also improved from 29 cents earned per share in the year-ago quarter on strong revenue.
Net profit shot up 88% year over year to $34.3 million from $18.2 million in the year-ago quarter.
Revenue climbed 30% year over year to a record-breaking $165.5 million and was well ahead of Zacks Consensus Estimate of $163 million. The quarter’s record revenue was attributable to its three main growth products –– Broadband Access, Internetworking and Optical Access –– all of which reached their all-time highs.
The combined year-over-year growth for the three growth products was a substantial 51%. Individually, Broadband Access grew 42% year over year, driven by continued adoption of the total access 5000 platform. Internetworking products grew 48% boosted by the expansion of channel and new applications. Optical Access soared 86% owing to higher mobile data demand.
Liquidity
ADTRAN’s balance sheet remains healthy. Cash and cash equivalents increased to $37.3 million at the end of the first quarter from $31.7 million at the end of fiscal 2010.
The company maintains zero debt balance but has long-term obligations to pay bonds that fell 2.1% to $46.5 million from the 2010 level of $47.5 million.
Dividend
The company’s board of directors declared a cash dividend of 9 cents per share for the first quarter. The dividend will be paid on May 12 to shareholders of record on April 28.
Our Analysis
ADTRAN’s three growth products are constantly delivering record revenues from the last year and are expected to continue doing so in the future. We believe the company is benefiting from several new product cycles in broadband access, wireless backhaul products, fiber to the node, Ethernet over copper, optical and enterprise VoIP.
However, competitive threats, regulations and customer concentration may limit the company’s growth. ADTRAN generates the majority of its revenue from big customers such as AT&T Inc. (T), Verizon Communications (VZ) and Qwest Communications. The merger of Qwest with CenturyLink Inc. (CTL) earlier this month would have adverse effects on revenue growth thereby restricting the company’s profitability.
Consequently, we are maintaining our long-term Neutral recommendation on the stock. However, for the short term (1–3 months), the stock retains the Zacks # 2 (Buy) Rank.
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