Adtran Inc. (NASDAQ:ADTN), a global provider of networking and communications equipment, reported fourth quarter earnings of 56 cents per share, surpassing the Zacks Consensus Estimate of 44 cents. The quarter’s results also improved from 29 cents per share earned in the year-ago quarter on strong revenue.
Net profit shot up 93% year over year to $36.0 million from $18.6 million in the year-ago quarter. Results from the company’s Broadband Access, Internetworking categories and Optical Access reached an all-time high, which led to record-breaking revenues in the fourth quarter.
Revenue climbed 33% year over year to $165.3 million in the fourth quarter and was well ahead of the Zacks Consensus Estimate of $155 million, driven by strong demand for high speed connectivity and Ethernet services.
Adtran reported fiscal 2010 earnings of $1.78 per share, up 52.1% year over year and revenue of $605.7 million, up 25.1% year over year.
Carrier Networks revenue rose 39% year over year to $130.3 million in the fourth quarter, driven by increased demand for higher speed services from residential and business customers in both fixed and mobile applications.
Enterprise Network revenue increased to $35.0 million from $30.4 million in the year-ago quarter. The division benefited from strong performance in its Internet working category attributable to continued growth in expanding dealer base and market share gains at Tier 1 and Tier 2 carriers.
Revenues from Products
Loop Access revenue climbed 24% to $48.8 million, driven by strong revenue from HDSL products (up 29% year over year).
Carrier Systems revenue shot up 44% year over year to a record level of $81.7 million. Broadband Access achieved record revenues of $49.7 million during the fourth quarter, up 75% year over year, driven by continued deployment of the total access 5000 platform. Optical Access product revenue increased 24% year over year to a record of $20.2 million.
Business Networking revenue leaped 25% to a record level of $34.8 million, driven by record Internet working product revenue of $31.6 million, up 37% year over year.
Adtran ended fiscal 2010 with cash and cash equivalents of $31.7 million compared with $24.1 million in the prior year. The company maintains zero debt balance but has a long-term liability toward bonds, which fell 0.5% year over year to $47.5 million.
The company’s board of directors declared a cash dividend of 9 cents per share for the fourth quarter. The dividend will be payable on February 17 to shareholders of record on February 3.
We believe Adtran is benefiting from several new product cycles in broadband access, wireless backhaul products, fiber to the node, Ethernet over copper, optical and enterprise VoIP. The company’s TA5000 platform is continuously gaining traction and is expected to boost profitability going forward. In addition, the broadband stimulus program, installation of Adtran equipment by Frontier Communications (NASDAQ:FTR) and strong international sales will likely boost the company’s performance in the future.
However, competitive threats, the regulatory environment and customer concentration may limit the company’s growth. Adtran derives the majority of revenue from its major customers such as AT&T Inc. (NYSE:T), Qwest Communications (NYSE:Q) and Verizon Communications (NYSE:VZ). Any reduction or loss in business from these customers could adversely affect revenue growth thereby restricting the company’s profitability.
We are currently maintaining our long-term Neutral rating on the stock with the Zacks #3 Rank (Hold).