Story updated at 9:55 a.m. to reflect market activity.
ADTRAN fell 1.9% to $22.03 in morning trading.
The firm reiterated its "neutral" rating for the company. UBS analysts Amitabh Passi and Tejas Venkatesh also cut EPS estimates for ADTRAN, citing an increase in operating expenses.
"On the earnings call, Adtran provided more clarity on its impressive 52.9% GM in 1Q14, attributing it to a) positive mix shift and product cost reductions across the entire business and b) skew towards higher-margin line cards vs. chassis," the analysts wrote. "In 2Q14, the company expects higher revenues from the international broadband access business, but also a mitigation of the favorable mix-impact resulting in GM in the range of 49- 50%. We believe the increasing international sales as a % of overall revenue as well as some uncertainty in the timing/scope of the upcoming AT&T ramp could cap GM improvements. Additionally, we're now seeing evidence of increased OpEx spending to sustain tier 1 ramps, and these factors contribute to our continued Neutral rating."
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Separately, TheStreet Ratings team rates ADTRAN INC as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:
"We rate ADTRAN INC (ADTN) a HOLD. The primary factors that have impacted our rating are mixed ? some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures and growth in earnings per share. However, as a counter to these strengths, we find that we feel that the company's cash flow from its operations has been weak overall."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 1.0%. Since the same quarter one year prior, revenues rose by 13.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
- ADTN's debt-to-equity ratio is very low at 0.08 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with this, the company maintains a quick ratio of 2.62, which clearly demonstrates the ability to cover short-term cash needs.
- Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Looking ahead, our view is that this company's fundamentals will not have much impact in either direction, allowing the stock to generally move up or down based on the push and pull of the broad market.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. When compared to other companies in the Communications Equipment industry and the overall market, ADTRAN INC's return on equity is below that of both the industry average and the S&P 500.
- Net operating cash flow has significantly decreased to $7.78 million or 62.74% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- You can view the full analysis from the report here: ADTN Ratings Report