Ahead Of The Bell: Networking Stocks Cut By Baird

NEW YORK (AP) — Investors have largely factored in the improving outlook for network gear makers, a Robert W. Baird analyst said Wednesday, predicting few surprises in third-quarter results for the sector.

In a note to clients, Baird analyst Kenneth Muth cut his rating for networking companies Alcatel-Lucent, CommScope Inc., Juniper Networks Inc. and Tellabs Inc. to "Neutral" from "Outperform."

Muth said he doesn't expect network equipment makers to miss Wall Street forecasts, but he expects sales at the low end of company projections and earnings in line or slightly better.

He said his checks show spending by telecommunications carriers has been roughly flat from the previous quarter, adding, "We believe a more meaningful pickup in carrier spending may not occur until mid-2010."

Shares of networking companies have also bounced back significantly this year with the broader market. Alcatel-Lucent and CommScope have more than doubled, while Juniper Networks and Tellabs are up by more than half.

Figuring expectations for improving demand next year are already priced in, Muth recommended investors take some profits from the shares.