Earnings question of the day: Does Adtran Inc. (Nasdaq: ADTN) know what's going on at Adtran these days? (See Adtran Delivers Big in Q3.)

It's worth asking, as the company's positive earnings news was met with a minor kink in its share price, probably reflecting uncertainty with the company's guidance for the rest of the year.

Adtran shares slipped $0.99 (3.30%) to $29.05 in early afternoon trading. Shares had traded as low as $28.20 when the company's earnings news first hit Wall Street.

Adtran reported better than expected earnings for its third quarter of 2005, at $33 million, or 42 cents a share, on revenues of $149.1 million, compared to earnings of $18.75 million, or 23 cents a share, on revenues of $115.25 million for the year-ago quarter.

That's higher than the upward guidance it gave just a little more than a month ago. Then it said it would earn 38 to 40 cents a share on revenues of between $143 million and $147 million (see Adtran Cranks Up the Volume).

Adtran also upped its guidance for the full year 2005. It now expects revenues for the year to be in the range of $512 million to $516 million, with diluted earnings per share coming in the range of $1.26 to $1.28. In September, Adtran said it expected to earn between $1.18 and $1.22 a share on revenues of $503 million to $511 million for the full year 2005.

Investors, while cheering Adtran's improved sales in broadband access and optical transport gear, are likely catching on that the company's revised numbers signal that its fourth quarter will likely be softer than the third.

"We note that revised '05 guidance implies a 4%-7% seq decline in 4Q sales & here we anticipate a modest q/q pull back in both Carrier & Enterprise sales," writes UBS Research analyst Nikos Theodosopoulos in a note to clients this morning.

One analyst thinks Wall Street should expect more from Adtran, now that it has gotten into the habit of surprising itself.

"We… believe some may be disappointed 4Q guidance was not raised higher, but on the bright side overall Street consensus should move higher, and many are likely to view the new 4Q guidance as conservative," writes Lehman Brothers analyst Marcus L. Kupferschmidt.

Why is Adtran having a hard time guiding its results? The company says its problem is a good one -- its newer technology products are growing faster than they thought. Products in its broadband access, optical access, and enterprise segments accounted for about 28 percent of Adtran's quarterly revenues."The size of each of these markets is in the mulitiple billions of dollars and represents significant growth areas for Adtran," said Thomas Stanton, Adtran's CEO, on the conference call this morning. He says those growth areas will make up the majority of Adtran's revenues over time.

Adtran ended its quarter with cash and investments totaling $345 million.

— Phil Harvey, News Editor, Light Reading