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Adtran's Rewarding Investors, as Promised

NEW YORK ( TheStreet) -- There are certain stocks that take off and never look back.

Given that shares of Adtran (ADTN - Get Report) are up since reporting strong first-quarter results, it's fair to say that this qualifies as taking off. Had you listened to me, you would have been on a nice joyride. ADTN closed up 14% to $22.46 Wednesday.

Last year presented prolonged struggles for Adtran. The company was constantly in a grind as carriers including AT&T (T) and Verizon (VZ) were forced to cut back on their spending due to market uncertainties. Consequently, Adtran stock fell 34%.

That being the case, the Street wasn't expecting much for the first quarter. This is even though management proved in the fourth quarter that it was more than capable of making the best out of a bad situation.

On Tuesday, the company posted adjusted earnings of 13 cents per share on revenue of $143 million, beating on both top- and bottom-line estimates. Granted, revenue growth wasn't stellar since growing at just 4%. But remember, this company is coming from a fourth quarter that saw a 20% revenue drop.

Profitability also arrived strong as the company posted gross margin and operating margin that were above consensus estimates. But not everyone is drinking this Kool-Aid today. Jefferies analyst George Notter, in particular, was not impressed. Notter suggested that Adtran did not provide enough details about the quarterly performance.

However, I thought management was clear enough. It's not as if Adtran's performance deviated that much from what was expected with respect to the company's domestic and international businesses. In that regard, management believes that Adtran is positioned perfectly for any recovery that may be realized with carriers and overall enterprise IT.

This is certainly an interesting situation that Adtran is now in. Earlier this week, we talked about the state of F5 Networks (FFIV), which also relies on carrier spending. But F5 declared (among other things) that weak carrier spending would be the reason why the company expects to post weaker-than-expected second-quarter results.
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