ADTRAN, Inc. (ADTN), AT&T Inc. (T): Be Prepared, a Crucial Week Is Coming up for This Company

Shares of telecom gear maker ADTRAN, Inc. (NASDAQ:ADTN) have been on a roll this year, appreciating a tad more than 30% so far. The signs that the company would do well were clearly evident late last year, but the journey this year has had its share of potholes. Earlier this year, it looked as if ADTRAN, Inc. (NASDAQ:ADTN) would fail to capitalize on telecom spending and deployment of faster networks, and as a result, the stock was in the doldrums.

The resurgence begins

However, a positively surprising quarterly report in April proved to be the catalyst and is the primary reason why the stock has risen like a rocket in the past three months. ADTRAN, Inc. (NASDAQ:ADTN)’s previous quarterly report was indeed surprising as I’d discussed in my previous post on the company, as earnings were boosted by a share repurchase program.

This was a major reason why ADTRAN, Inc. (NASDAQ:ADTN) posted earnings of $0.17 per share, miles ahead of the consensus estimate of $0.08 a share, and this led to a massive spike in the stock price. The stock was turbocharged after the report and has continued its journey north ever since.

But, the real challenge lies ahead next week on July 10, when ADTRAN, Inc. (NASDAQ:ADTN) releases its second-quarter earnings. Investors will be hoping that the momentum continues. But, will ADTRAN, Inc. (NASDAQ:ADTN) be able to replicate its prior quarter’s performance and provide positive commentary along with it? Let’s try to find out.

On revenue and outlook

Analysts expect ADTRAN to post revenue of $154 million, which translates into a decline of 16% from last year’s second quarter. While the year-over-year reading would probably look bad, ADTRAN has a strong history of at least meeting consensus estimates. It has satisfied revenue estimates in four out of the last five quarters, and while it doesn’t provide a specific outlook, management’s comments over the previous conference call indicate that the trend might continue.

The company is witnessing share gains at its various customers, and its Broadband Access business has been growing at a fast clip. Management had stated that it is seeing improvements in ADTRAN’s carrier and enterprise businesses and is optimistic about the future of these businesses as carriers around the world upgrade networks.

The fact that the company has been awarded initial orders for a multi-year network upgrade from one of its major clients, which might be AT&T Inc. (NYSE:T), should keep its revenue stream flowing forward. ADTRAN spiked considerably last year when AT&T Inc. (NYSE:T) announced that it would boost capital spending to upgrade its wireless and wireline broadband networks.