ADTRAN (ADTN) Q3 Loss Wider Than Expected, Revenues Fall Y/Y

ADTRAN, Inc. (NASDAQ:ADTN) reported lackluster third-quarter 2019 financial results, wherein the top line decreased year over year.

Net Loss

On a GAAP basis, net loss for the September quarter was $46.1 million or loss of 96 cents per share against net income of $7.6 million or 16 cents per share reported in the year-ago quarter. The deterioration was primarily due to lower revenues and income tax expense.

Non-GAAP net loss came in at $2.8 million or loss of 6 cents per share against net income of $9.9 million or 21 cents per share posted in the prior-year quarter. The bottom line was wider than the Zacks Consensus Estimate of a loss of 2 cents.

ADTRAN, Inc. Price, Consensus and EPS Surprise

Revenues

Quarterly revenues were $114.1 million compared with $140.3 million in the year-earlier quarter, matching the consensus estimate. The decline was attributable to lower sales at network solutions, which fell 22.3% year over year to $94 million. Sales from services and support were $20.1 million, up 4.1%.

Other Details

Total cost of sales declined from $81.9 million to $67.8 million year over year. Gross profit came in at $46.3 million compared with $58.4 million in the prior-year quarter. Operating loss for the third quarter was $20.3 million compared with operating loss of $2.2 million posted a year ago.

ADTRAN’s performance was hit by a pause in shipments to a Tier 1 customer in Latin America and a slowdown in spending by a Tier 1 customer in Europe. During the reported quarter, the company introduced a range of new products, services and technology innovations that are likely to contribute to its long-term success.

Concurrent with the results, the company communicated that its board of directors has announced a quarterly cash dividend of 9 cents per share to shareholders of record as of Nov 14, payable on Dec 2.

Cash Flow & Liquidity

During the first nine months of 2019, ADTRAN generated $10.1 million of net cash from operating activities compared with $48.7 million in the year-ago period. As of Sep 30, 2019, the networking equipment maker had $96.4 million in cash and equivalents, with $52.2 million of non-current liabilities.

Going Forward

ADTRAN continues to optimize its customer, geographic and product diversity momentum as communications service providers scale their network capabilities. The company is likely to benefit from growing customer engagements across its comprehensive portfolio of software-defined access, 10G solutions and G.fast products. This apart, its global strategy of diversification across geographies and markets instills optimism.

Zacks Rank & Stocks to Consider

ADTRAN currently has a Zacks Rank #3 (Hold).

A few better-ranked stocks in the broader industry are Harmonic Inc. (NASDAQ:HLIT) , Altice USA, Inc. (NYSE:ATUS) and Viavi Solutions Inc. (NASDAQ:VIAV) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Harmonic surpassed earnings estimates in each of the trailing four quarters, the average surprise being 48.3%.

Altice surpassed earnings estimates in each of the trailing four quarters, the average surprise being 158.5%.

Viavi surpassed earnings estimates thrice in the trailing four quarters, the average positive surprise being 14.5%.

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