ADC Telecom shares slip despite earnings, upgrades

ADC Telecommunications shaved off 1 1/2 to 42 7/8 Friday despite receiving several upgrades following its strong third-quarter earnings report.

In the quarter, ADC Telecom (Nasdaq: ADCT) earned $137 million, or 20 cents a share, on record sales of $891 million, excluding acquisitions and one-time items.

First Call Corp. consensus expected it to earn 15 cents a share in the quarter.

On Friday, several analysts upgraded the stock and issued bullish comments.

"We believe the fundamental industry drivers behind ADC are likely to continue to push this company forward," wrote Lehman Brothers' Steven Levy. "We are introducing new revenue forecasts ($3.25 billion for 2000) and EPS estimates (55 cents)- we would not be surprised if these projections prove to be fairly conservative."

PaineWebber's William Choi bumped his fiscal 2002 estimate for fiscal 2002 to $1.05 a share and raised his price target from $48 to $63 a share.

USB Piper Jaffray's Frank McEvoy upped his price target from $55 a share to $72 a share and reiterated his "strong buy" rating.

Nikos Theodosopoulos of UBS Warburg reiterated his "buy" rating and boosted his price target to $55 a share from $36 a share.

The $891 million in sales marks a 67 percent jump from the year-ago quarter when it earned $48 million, or 7 cents a share, on sales of $535 million.

"We continue to exceed our growth expectations in 2000 as our customers' requirements to build and upgrade networks for Internet and broadband communications services is proving to be stronger than anticipated," said CEO William Cadogan in a prepared release.

In the quarter, sales of its broadband connectivity products improved 120 percent while broadband access and transport sales and integrated solutions sales increased 19 percent and 35 percent, respectively.

International sales rose 59 percent from the year-ago quarter to $191 million, or 21 percent of the company's total sales in the quarter.

Last quarter, ADC Telecom topped analysts' estimates when it earned $94 million, or 29 cents a share, on sales of $709 million.

Its shares rallied up to a 52-week high of 49 in July ahead of a 2-for-1 stock split. The stock hit a low of 8 9/16 last August.

All 23 analysts following the stock rate it either a "buy" or "strong buy."

Analysts are expecting a profit of 56 cents a share in the fiscal year.