ADTRAN Beats In 4Q, Goldman Raises Estimates

Goldman Sachs has published a research report on ADTRAN, Inc. ADTN after the company reported top- and bottom- line beats in its 4Q, impressing analysts. In the report, Goldman Sachs writes "Adtran's stronger than expected results are largely attributable to services as a new revenue driver for the model. We estimate that services revenues were around $7-8 mn in 4Q, up from a negligible amount in 3Q, and were not explicitly modeled by the Street. The services sales in 4Q were related to installations for a single customer, though Adtran expects to broaden its customer base and grow services going forward. We view this as an incremental $25-30 mn revenue opportunity in 2011, with GM/OM in the mid-30%s. In addition, management expects incremental revenue with international customers in 2011, primarily in LatAm, which we estimate could add another $25-30mn. These two drivers further add to the visibility into Adtran's revenue growth in 2011 beyond the Frontier and Broadband Stimulus opportunities that we have previously discussed." Goldman Sachs maintains its Neutral rating and and has raised the price target from $34 to $39. ADTRAN closed yesterday at $42.25.