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ADTRAN Q3 Earnings: Is NasdaqGS:ADTN Expensive at 123.5x Forward P/E?

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ADTRAN, Inc. (NasdaqGS:ADTN) is scheduled to report Q3 earnings results after markets close for trading on November 2, 2020.

The company is expected to report earnings of $0.07/share on revenue of $132.8 million. The consensus earnings per share (EPS) of $0.07/share is based on a poll of 6 analysts and represents a growth in eps of 213.9% over the same quarter last year, when the company reported earnings of -$0.06/share.

The revenue forecast of $132.8 million based on a poll of 7 analysts implies a year-over-year (YoY) growth in revenue of 16.4%. Last year the company reported $114.1 million in revenue for the quarter.

Expected to report EPS of $0.07/share for Q3, 2020
Metric Expected Prior Year YoY Change
Revenue $132.81 $114.09 16.4%
EPS $0.07 -$0.06 213.9%

Earnings Call Trends

Historically, management has exceeded analyst expectations 6 out of the last 8 tracked quarters, missed 1 quarters, and met expectations 1 quarters.

What are your expectations from ADTRAN, Inc. for earnings this quarter? Let us know in the comments!

Analyst Expected vs. Reported EPS
Quarter Expected Reported Surprise Result
Q2, 2020 $0.01 $0.04 300.0% Beat
Q1, 2020 -$0.09 -$0.05 44.4% Beat
Q4, 2019 -$0.12 -$0.07 42.6% Beat
Q3, 2019 -$0.06 -$0.06 0.0% Met
Q2, 2019 $0.08 $0.14 84.2% Beat
Q1, 2019 -$0.06 $0.10 272.4% Beat
Q4, 2018 -$0.03 -$0.12 -252.9% Missed
Q3, 2018 $0.04 $0.21 400.0% Beat

In the following table, we summarize the company’s stock price movements after earnings releases. The “Price Day Prior” column shows the closing stock price on the day before the earnings report, and the “Price Next Day” column shows the stock price at the end of the trading day after the earnings report. After the last earnings report for the period ending June 30, 2020, the stock price reacted by falling −3.4%.

Stock Price Performance After Earnings
Report Date Price Day Prior Price Next Day Change % Result
August 6, 2020 $12.84 $12.40 −3.4% Decline
May 7, 2020 $10.27 $11.38 10.9% Increase
February 6, 2020 $9.93 $8.63 −13.1% Decline
October 31, 2019 $9.58 $9.18 −4.2% Decline

The other question to consider is one of earnings manipulation. There is a lot of pressure on management each quarter to deliver on earnings expectations. The Beneish M-Score is a statistical model that provides some insight into whether the company might be manipulating earnings. With a Beneish M-Score of −3.16, the model suggests that the company is not likely to be an earnings manipulator. A value of −3.16 implies a 0.1% chance of earnings manipulation.

Fundamentals And Technical Analysis

ADTRAN, Inc. is currently trading at $12.01/share, down −3.3% for the day. The company is trading at approximately 91.0% of its 52-week high of $13.20/share. The company’s stock price is down −3.1% since the last earnings report and up 3.2% over the previous week.

The company’s 14 Day Relative Price Index (RSI) of 65.02 suggests the company is trading in technically neutral territory. The RSI is considered overbought when above 70 and oversold when below 30.


NasdaqGS:ADTN Stock Price Chart
Source: Finbox

The current share price implies a price-to-earnings (P/E) multiple of −8.60 and a forward P/E multiple of 123.47.

ADTRAN, Inc.’s current share price also implies a price-to-book (P/B) multiple of 1.58. The following table summarizes some other key fundamental ratios:

Data as of October 27, 2020
Metric Value
Last Reported Fiscal Period Key FY2020.Q2
Period End Date June 30, 2020
Stock Price (Current) $12.01
P/E Ratio −8.6x
P/E Ratio (Fwd) 123.5x
PEG Ratio 0.0
Total Debt / Total Capital 1.0%
Levered Free Cash Flow -$20.133 million
EV / EBITDA −21.0x

Finbox

ADTRAN, Inc. is a small-cap stock with a market capitalization of $576 million and a total enterprise value of $477.8 million. The company operates in the Information Technology sector and the Communications Equipment industry.

ADTRAN, Inc. provides networking and communications equipment for service providers, cable/multiple system operators, and distributed enterprises in the United States and internationally. The company operates through Network Solutions, and Services & Support segments. It offers fiber to the premises and fiber to the node (FTTN) multi-service access nodes (MSAN); fiber aggregation and FTTN MSAN; network management and subscriber services control and orchestration software; software defined networking -controlled programmable network elements; fiber to the distribution point units; optical line terminals and transport solutions; optical networking edge aggregation; IP digital subscriber line access multiplexers; cabinet and outside-plant enclosures and services; transceivers, cables, and other miscellaneous materials; and other products, software, and services. The company also provides broadband customer premise solutions and point-to-point Ethernet optical network terminals; radio frequency over glass micro nodes; residential gateway products and accessories; Wi-Fi access points; ethernet switches for multi-gigabit local area networking; SmartOS software licensing for residential and enterprise gateway, and Wi-Fi devices; cloud-based SaaS management platforms; Wi-Fi-enabled residential gateway products and accessories; access points and virtual wireless local area networks for business-class Wi-Fi and management; and pre-sale and post-sale technical support. In addition, it offers planning, engineering, program management, maintenance, installation, and commissioning services. Further, the company offers time division multiplexed and asynchronous transfer mode based aggregation systems and customer devices; and high-bit-rate digital subscriber line, asymmetric digital subscriber line, and other technologies to deliver business and residential services. ADTRAN, Inc. was founded in 1985 and is headquartered in Huntsville, Alabama.

Expertise: financial modeling, mergers & acquisitions. Andy is also a founder at finbox.io, where he’s focused on building tools that make it faster and easier for investors to do investment research. Andy’s background is in investment banking where he led the analysis on over 50 board advisory engagements involving mergers and acquisitions, fairness opinions and solvency opinions. Some of his board advisory highlights: - Sears Holdings Corp.’s $620 mm spin-off via rights offering of Sears Outlet, Hometown Stores and Sears Hardware Stores. - Cerberus Capital Management’s $3.3 bn acquisition of SUPERVALU Inc.’s New Albertsons, Inc. assets. Andy can be reached at andy@finbox.io or at +1 (516) 778-6257.

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