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Stock Analyst Update

Adtran Warn Leads to Fair Value Trim

We're expecting more tepid revenue growth in 2018, and are knocking $1 off our fair value estimate of the no-moat firm.


On Dec. 28,  Adtran (ADTN) announced a downward revision to its fourth-quarter financial forecast. The company now expects revenue of approximately $125 million, below previous guidance of $155 million-$165 million. It also guided for a GAAP loss of $0.04 per share and non-GAAP earnings per share of $0.01 for the quarter. In addition, Adtran expects sequentially flat fiscal 2018 first-quarter revenue. The company cited a merger-related slowdown in capital expenditures at one of its Tier 1 customers, which we think is CenturyLink. Adtran expects this merger-related spending review to be completed in 60-90 days, which is reflected in its cautious guidance for the first quarter. While we don’t expect Adtran to lose this deal, we bake in a more tepid revenue growth assumption for 2018 at this point. After updating our model, we are cutting our fair value estimate for no-moat Adtran to $18 per share from $19. We will know more in the coming days and will revisit our valuation as planned when the company reports fourth-quarter results Jan. 17.

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Ilya Kundozerov does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

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