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ADTRAN Holdings (ADTN) Down 2.2% Since Last Earnings Report: Can It Rebound?

A month has gone by since the last earnings report for ADTRAN Holdings (ADTN). Shares have lost about 2.2% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is ADTRAN Holdings due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

ADTRAN Q1 Earnings Beat Estimates, Revenues Down Y/Y

ADTRAN reported healthy first-quarter 2024 results, wherein both the bottom line and the top line beat the respective Zacks Consensus Estimate. The expansion of the Mosaic One platform reportedly boosted its customer base. On a year-over-year basis, revenues contracted due to soft macroeconomic trends.

Net Income

On a GAAP basis, net loss in the March quarter was $324.6 million or a loss of $4.12 per share compared with net loss of $40 million or a loss of 51 cents per share in the prior-year quarter. The year-over-year wider loss was primarily due to revenue contraction and increasing operating expenses.

Non-GAAP net loss was $1.7 million or a loss of 2 cents per share compared with a net loss of $10.6 million or a loss of 14 cents per share a year ago. The loss was narrower than the Zacks Consensus Estimate of a loss of 8 cents.

Revenues

Quarterly total revenues dropped to $226.1 million from $324 million in the prior-year quarter, owing to soft demand trends across the network solutions business. The top line beat the consensus estimate of $223 million.

Network Solutions contributed $181.3 million in revenues compared with $282.4 million in the prior-year quarter. Services and Support revenues were $44.9 million, up from $41.5 million a year ago.

Other Details

Non-GAAP gross margin in the reported quarter was 41.6% compared with 37.3% in the prior-year quarter, indicating growth of 429 basis points year over year. Operating margin in the first quarter was negative 3.9%, which was within the company’s guidance. Seasonal variations and unfavorable currency rate development adversely impacted the operating margin in the quarter.

Total cost of sales decreased from $236.1 million to $153.9 million. GAAP gross profit came in at $72.2 million compared with $87.8 million in the prior-year quarter. Operating loss in the quarter was $339.6 million compared with an operating loss of $49.7 million in the year-ago quarter.

Cash Flow & Liquidity

In the first three months of 2024, ADTRAN generated $36.6 million of cash from operating activities against a cash utilization of $19.9 million in the prior-year period. As of Mar 31, 2024, the company had $106.7 million in cash and cash equivalents with $29.7 million of deferred compensation liability compared with $87.1 million and $29 million, respectively, in the prior-year period.

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How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

The consensus estimate has shifted -50% due to these changes.

VGM Scores

At this time, ADTRAN Holdings has a strong Growth Score of A, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, ADTRAN Holdings has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

ADTRAN Holdings is part of the Zacks Technology Services industry. Over the past month, Rocket Companies (RKT), a stock from the same industry, has gained 4.8%. The company reported its results for the quarter ended March 2024 more than a month ago.

Rocket Companies reported revenues of $1.38 billion in the last reported quarter, representing a year-over-year change of +107.7%. EPS of $0.04 for the same period compares with -$0.06 a year ago.

For the current quarter, Rocket Companies is expected to post earnings of $0.05 per share, indicating a change of +350% from the year-ago quarter. The Zacks Consensus Estimate remained unchanged over the last 30 days.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Rocket Companies. Also, the stock has a VGM Score of F.

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ADTRAN Holdings, Inc. (ADTN) : Free Stock Analysis Report

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