Why Shares of ADTRAN Inc. Slumped Today

By Markets Fool.com

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.

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What: Shares of ADTRAN , a provider of networking and communications equipment, slumped on Wednesday after the company reported largely disappointing earnings. By 2:15 Wednesday afternoon, the stock was down about 9%.

So what: ADTRAN's revenue declined by 2.8% year-over-year to $142.8 million during the first quarter, about $3 million shy of analyst estimates. Currency fluctuations were a major driver of this poor revenue performance, as was the cancellation of a program involving Tier 1 carriers that was expected to begin during the first quarter.

ADTRAN did manage to beat analyst estimates for non-GAAP EPS, although profits plunged compared to the same quarter in 2014. ADTRAN reported non-GAAP EPS of $0.10, two cents better than analyst expectations but well below the $0.21 reported during the first quarter of 2014. On a GAAP basis, ADTRAN's EPS declined by nearly two-thirds year-over-year to just $0.06.

Now what: ADTRAN had a difficult quarter, and the market punished the stock as a result. Even after the decline in the stock price, shares still trade at a P/E ratio of about 21, based on earnings from 2014. While analysts are expecting substantial earnings growth going forward, nearly 25% annually for the next five years, that may be far too optimistic in light of the difficulties the company is currently experiencing.

The article Why Shares of ADTRAN Inc. Slumped Today originally appeared on Fool.com.

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Timothy Green has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.