Shares of Adtran (NASDAQ:ADTN) plunged today, and are down by 22% as of 11:35 a.m. EDT, after the networking equipment company announced preliminary fiscal third-quarter earnings estimates that were well below the market's expectations.
Revenue in the fiscal third quarter should be approximately $114 million, compared to the consensus estimate of $140.2 million in sales. That should translate into an adjusted loss per share of $0.06, while analysts were modeling for $0.03 per share in adjusted profit. In a statement, CEO Tom Stanton explained the shortfall:
Our revenue this quarter has been significantly impacted by a pause in shipments to a Tier 1 customer in Latin America and the continued slowdown in the spending at an international Tier 1 customer. With the exception of these two large customers, revenues generated from the rest of our business grew 20% over the previous quarter. Although we expect our Latin American customer sales to rebound, our current visibility regarding timing is limited. For the international Tier 1 customer, we expect that sales should resume with the new capital cycle in 2020.
MKM Partners analyst Michael Genovese downgraded Adtran shares from buy to neutral following the news, clarifying that the top-line miss was attributable to reduced orders at Deutsche Telekom and the pause in shipments relates to Telmex. MKM reduced its price target from $17 to $11.
Adtran also provided an outlook for the fiscal fourth quarter, with revenue expected to be flat to slightly down on a sequential basis. Adjusted operating expenses should be roughly 10% lower than adjusted expenses in the second quarter.