Sonus Networks surged 27 percent in anticipation of its first-quarter earnings report Tuesday. Analysts are expecting the communications equipment maker to beat estimates and give bullish projections.
Shares of the company were up $4.27 to $20.28. Sonus makes hardware and software that allows public network providers--including long-distance carriers, Internet service providers and cable operators--to offer voice and data networks.
"In Sonus' brief history, the company has consistently given conservative forward guidance. We do not believe that this quarter will be any different," said analyst Michael Brown of Dain Rauscher Wessels.
Brown reiterated his "strong buy--aggressive" rating on the stock, and said he expects Sonus to exceed his estimate for revenue of $34.98 million and a break-even amount on earnings. Those estimates are even above analysts' consensus; First Call estimates revenue of $33.76 million and a loss of 2 cents a share.
Brown's confidence is based on recent checks with customers, which show that they continued to invest in next-generation voice infrastructure in the current quarter. His price target is $57.
Josephthal & Co analyst Lawrence M. Harris, who maintained a "buy" rating, also expects the company will top his estimates for revenue of $34 million and a loss of 2 cents a share.
WR Hambrecht analyst Tim Savageaux also expects the company to top his revenue estimate of $37 million and loss of 2 cents a share.
The company's anticipated performance is strong compared to its peers. Redback Networks (Nasdaq: RBAK) also reports official first-quarter results this week, on Wednesday. But analysts aren't expecting much considering it just pre-announced a significant revenue and earnings shortfall on April 2.
"In stark contrast to both the larger equipment suppliers such as Lucent, Nortel and Cisco as well as emerging networkers such as Sycamore Networks and Redback Networks, we believe visibility for Sonus remains strong in an uncertain overall environment in communications equipment," Savageaux wrote.
Things to watch for in the company's report include the percentage of revenue that comes from voice applications. Brown noted that the company's ability to grow this market segment is critical, and he expects packet voice applications revenue will make up about 75 percent of total revenue.
Harris also noted that Sonus' products are now being tested by a large number of emerging and incumbent carriers. These trials could eventually turn into orders, giving the company strong business later this year, or by 2002 at the latest.
"For risk-tolerant investors, we believe that Sonus represents an attractive alternative to traditional equipment suppliers," Harris wrote.