Seeing Flat Carrier Spend, Baird Downgrades ALU, JNPR, TLAB, CTV

Seeing sequentially flat carrier spending in the third quarter, Robert W. Baird analyst Kenneth Muth this morning downgraded his ratings on Alcatel-Lucent (ALU), Juniper (JNPR), Tellabs (TLAB) and CommScope (CTV), all to Hold from Outperform. “While we expect these stocks to hit Q3 Street estimates,” he writes, “we see limited upside to revenue and EPS and recommend taking profits given the expansion of valuations and elevated 2010 expectations.

Muth notes that the stocks in the sector on average are up 77% year to date, more than twice the gain on the Nasdaq Composite. Meanwhile, he contends that global carriers remain cautious as the economic environment appears little changed for them in the quarter from Q2. He notes that U.S. spending looks stable, but that Europe and Latin America “remain very weak,” while China slowed during the summer but should pick up in Q4.

Enterprise fundamentals appears to bne “picking up more noticeably” than the carrier sector, he notes, especially in the U.S., which should help enterprise-focused equipment vendors.

In today’s trading:

• ALU is up 2 cents, at $4.53.


• JNPR is down 40 cents, or 1.4%, to $27.30.


• TLAB is down 44 cents, or 6.1%, to $6.81.


• CTV is down $1.38, or 4.2%, to $31.47.