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ADTRAN (ADTN) to Report Q2 Earnings: What’s in the Cards?

Zacks

ADTRAN, Inc. ADTN is scheduled to report second-quarter 2018 results after the closing bell on Jul 17. Although this communication infrastructure provider delivered an average positive surprise of 51.3% in the trailing four quarters, it widely missed earnings estimates in the last quarter.

Let's see how things are shaping up for this announcement.

Factors to Consider

ADTRAN is accelerating the industry’s transition to open, programmable, scalable networks by leveraging its Mosaic Software-Defined Access architecture that combines modern Web-scale technologies with open-source platforms to facilitate rapid innovation in multi-technology, multi-vendor environments. This will enable operators to better face Web-scale competition by reducing time and cost to introduce new service, technologies and best-of-breed suppliers as they strive to reduce operational costs while creating and deploying differentiated product offerings.

However, despite its best efforts, ADTRAN remains plagued by a merger-related review and slowdown in spending at a domestic Tier 1 customer. High operating costs and lower margins are additional concerns for the company.

The success of 5G technology hinges on substantial investments to upgrade infrastructure in the core fiber backhaul network to support anticipated growth in data services. Although these investments will eventually help minimize service delivery costs to adequately support broadband competition, rural coverage and wireless densification, short-term profitability is likely to fall, leading to earnings dilution.

Efforts to build resilient infrastructure facilities to withstand natural catastrophes further increase operating costs. Moreover, simmering tensions between the United States and China related to trade restrictions imposed on the sale of communication equipment to the Chinese firms have dented the credibility of the industry and led to loss of businesses.

Earnings Whispers

Our proven model does not conclusively show that ADTRAN is likely to beat earnings this quarter as it does not possess the key components. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is not the case here as you will see below:

Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and Zacks Consensus Estimate, is 0.00% with both pegged at a loss of 23 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

ADTRAN, Inc. Price and EPS Surprise

ADTRAN, Inc. Price and EPS Surprise | ADTRAN, Inc. Quote


Zacks Rank: ADTRAN currently has a Zacks Rank #5 (Strong Sell).

Note that we caution against stocks with a Zacks Rank #4 (Sell) or 5 going into the earnings announcement, especially when the company is seeing a negative estimate revisions momentum.

Stocks to Consider

Here are some companies that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Comerica Incorporated CMA has an Earnings ESP of +1.60% and Zacks Rank #3.

Workday, Inc. WDAY has an Earnings ESP of +8.62% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

NVIDIA Corporation NVDA has an Earnings ESP of +0.48% and a Zacks Rank #3.

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