Shares of ADTRAN, Inc. (ADTN Quick QuoteADTN - Free Report) have surged 101.5% over the past two years, driven by an accretive customer base and healthy revenues on the back of software innovations. Earnings estimates for the current fiscal year have increased 50% since March 2022, and the same for the next fiscal has moved up 13.4%, implying robust inherent growth potential. With healthy fundamentals, this Zacks Rank #2 (Buy) communications equipment manufacturer appears to be a solid investment option at the moment. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Growth Drivers

ADTRAN is focused on being a top global supplier of Access infrastructure and related value-added solutions from the Cloud Edge to the Subscriber Edge through a broad portfolio of flexible hardware and software network solutions. These products enable customers to transition to the fully converged, scalable, highly automated, cloud-controlled voice, data, Internet and video network of the future. The company has enabled service providers to leverage the ADTRAN Mosaic Software-Defined Access architecture that combines modern Web-scale technologies with open-source platforms to facilitate rapid innovation in multi-technology, multi-vendor environments. The Mosaic cloud platform and Mosaic OS, combined with programmable network elements, provide operators with a highly agile, open-services architecture. This allows operators to better compete with Web-scale competition by reducing the time and cost to launch new services, technologies and best-of-breed suppliers as they strive to reduce operational costs while creating and deploying differentiated product offerings.

Despite challenging macroeconomic conditions, ADTRAN expects solid traction in domestic markets for ultra-broadband and Fiber-To-The-Home solutions, along with SD access and EPON solutions. Its products and services provide solutions supporting fiber- and copper-based infrastructures and a growing number of wireless and coax-based solutions, lowering the overall cost to deploy advanced services across a wide range of applications. The company also anticipates a pickup in capital spending in Tier-1, Tier-2 and regional service provider market segments with increasing 5G deployments. ADTRAN’s global leadership in software-defined access is likely to ensure a steady stream of revenues as it helps clients reduce costs and accelerate service delivery and deployment.

The company expects to gain from increased customer engagements across a comprehensive portfolio of software-defined access, 10G solutions and G.fast products, thereby enabling carriers to upgrade slower legacy networks to state-of-the-art technologies. In order to complement the Network Solutions portfolio and enable customers to accelerate time to market, reduce costs and improve satisfaction, ADTRAN offers a complete portfolio of maintenance, turnkey network implementation, solutions integration and managed services. The company’s network implementation services offer a full spectrum of services related to engineering (pre-construction), installation/turn-up (construction) and provisioning (post-construction), partnering with customers to tailor a program to meet each service delivery need. The ProCloud Wi-Fi service, which has been developed on the company’s virtual Wireless LAN, is opening up new opportunities as Valley Business Solutions is utilizing its technology on a much wider scale. Apart from these products, the company has registered significant growth in its professional service activities that deploy the Total Access System components in telecommunication companies.

Additionally, ADTRAN has acquired ADVA Optical Networking SE in an all-stock deal. The buyout of the leading Germany-based telecommunications vendor that provides network equipment for data, storage, voice and video services is likely to disrupt the fiber networking market with a huge pool of complementary assets. The transaction aims to leverage ADTRAN’s expertise in fiber access, fiber extension and subscriber connectivity solutions with ADVA’s global leadership in metro wavelength division multiplexing, data center interconnect, business Ethernet and network synchronization solutions to create a comprehensive portfolio of fiber networking products. The combined entity is expected to generate $52 million in pre-tax annual cost synergies within the first two years of operation, driven by supply chain efficiencies and optimization of resources. The entity is likely to better serve customers with scalable, secure and assured fiber connectivity along with cloud-managed Wi-Fi solutions and SaaS applications that optimize network performance. The complementary product lines will further enhance the scope of cross-selling opportunities to strengthen its regional presence and achieve a global scale of operations to create significant long-term value for stakeholders.

The stock delivered an earnings surprise of 167.9%, on average, in the trailing four quarters. With a modest dividend yield of 1.5%, this stock appears to be an enticing investment option for the volatile market.

Other Key Picks

TESSCO Technologies Incorporated , carrying a Zacks Rank #2, delivered an earnings surprise of 61.9%, on average, in the trailing four quarters. Earnings estimates for TESSCO for the current year have moved up 49.4% since August 2021.

TESSCO offers products to the industry’s top manufacturers in mobile communications, Wi-Fi, wireless backhaul and related products. With more than three decades of experience, it delivers complete end-to-end solutions to the wireless industry.

Spirent Communications plc (SPMYY Quick QuoteSPMYY - Free Report) carries a Zacks Rank #2. Earnings estimates for the current year for the stock have moved up 10.8% since August 2021, while that for the next year is up 11.8%.

Founded in 1936 and headquartered in Crawley, the United Kingdom, Spirent offers a comprehensive, end-to-end solution that validates forwarding performance, latency and functional capabilities in an integrated approach that reduces the cost of ownership. It is a leading provider of Ethernet validation solutions in the market.

Harmonic Inc. (HLIT Quick QuoteHLIT - Free Report) , sporting a Zacks Rank #1, delivered an earnings surprise of 79.8%, on average, in the trailing four quarters. Earnings estimates for Harmonic for the current year have moved up 17.1% since February 2022.

Harmonic provides video delivery software, products, system solutions and services worldwide. With more than three decades of experience, it has revolutionized cable access networking via the industry's first virtualized cable access solution, enabling cable operators to more flexibly deploy gigabit Internet service to consumers' homes and mobile devices.