Advanced Fibre jumps on analysts'' view

Advanced Fibre Communications, Inc. (Nasdaq: AFCI) was up 19 percent Wednesday despite lowering some expectations for 2001. Analysts praised its solid fourth quarter report while lowering earnings estimates.

Shares were up $4.06 to $24.63 Wednesday as investors reacted to Tuesday night's report.

Fourth-quarter revenues were $116.1 million, compared with $82.79 million for the fourth quarter of 1999, an increase of 40 percent. Revenues for the full year were $416.85 million, compared with $296.61 million for 1999, an increase of 41 percent.

Net income for the fourth quarter was $26.91 million, or 32 cents a share. This includes a $10.14 million payment due from Marconi Communications Inc. based on their failure to meet distribution revenue goals during 2000. Without this gain, net income would have been $20.22 million, or 24 cents per share.

That topped the company's pre-released guidance and analysts' expectations for 16 cents a share and was up over 15 cents a share in the previous quarter and 9 cents a share in the year ago quarter.

The company said in its release that although the winter months are typically a time for slower deployment, and certain carriers have slowed spending and are conserving capital, it looks forward to growth in 2001.

Analysts took the upbeat outlook cautiously and lowered targets for 2001 while maintaining ratings.

Goldman Sachs analyst Tina M. Gadwal praised the company's earnings for the quarter but reduced estimates for the stock based on an uncertain outlook

Management had emphasized during the company's conference call that outlook for domestic telecom equipment spending is uncertain, as the company has seen a recent softness, particularly related to CLEC (competitive local exchange carriers) spending, which makes up about 15 to 30 percent of revenue.

"While the near-term outlook is uncertain, we believe AFC is poised long-term for a multi-year growth cycle. Long-term shareholders will find AFC's stock attractive," the analyst said in a research note.

J.P. Morgan analyst Michael Krauss held a "long-term buy" rating while also reducing estimates.

Krauss said the news that carrier spending was slowing was not surprising, "given what other access equipment vendors are seeing." He reduced 2001 revenue and earnings estimates to $475 million and 65 cents a share from $520 million and 70 cents a share, respectively.

WR Hambrecht & Co. analyst Tim Savageaux reiterated a "buy" rating and said that while CLEC spending issues and slower-than-expected DSL deployment have led him to trim his outlook for 2001 by a nickel a share, he "can't remember a better time to buy AFC shares since the fall of 1998."

The company has a large, all-star customer base, is gaining share and has leadership in new products. Industry analyst estimates and margins are expanding, the analyst observed. Savageaux also believes its only a matter of time before DSL deployment happens, and that AFC is one of the best managed companies in its space.

"The shares are dirt cheap," Savageaux said.