ADTRAN: When Bad Earnings Warnings Are Good (ADTN)

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How many times do you see a technology stock rally after an earnings warning?  An earnings warning from ADTRAN, Inc. (NASDAQ: ADTN) was met with a rally in the stock today. The networking and communications equipment maker lowered its first quarter guidance noting that its forecast reflects its view of very-poor sentiment among capital spending plan makers in communications service providers.

The first quarter sales guidance was taken down to $130 million to $135 million against a consensus estimate of almost $175 million.  Earnings were brought down to a range of $0.22 to $0.25 EPS versus estimates of $0.44 EPS.  And this stock managed to post a comeback rally?  Shares were trading down about 3.2% in early pre-market trading on Thursday.

Morgan Keegan said that sentiment was already weak and it lowered its price target to $31.50 on the stock.  Right before the closing bell, ADTRAN shares are up 3.4% at $32.26 on 3.5 million shares.  The 52-week trading range is $25.46 to $45.45.