Why ADTRAN Shares Plunged

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of communications equipment specialist ADTRAN (Nasdaq: ADTN  ) slumped 11% on Wednesday after its quarterly results came in below Wall Street expectations.

So what: ADTRAN's disappointing results -- earnings fell 43% while revenue was down slightly -- mark its third straight quarter of bottom-line decline, reinforcing fears over its profitability going forward. A tough spending environment, coupled with rising costs, continue to pressure the company's margins, giving investors little hope for a near-term turnaround.

Now what: I'd look into this pullback as a possible entry point for patient Fools. "Decreasing visibility leaves us cautious for the near term," said CEO Tom Stanton in a statement, "but we are confident that our strong customer alignment and increasing global footprint will deliver long term growth for the company." With the stock hitting a new 52-week low today and trading at a cheapish forward P/E of 11, buying into that optimism might just pay off over time.

Interested in more info on ADTRAN? Add it to your watchlist.

Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Try any of our Foolish newsletter services free for 30 days.

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