On Apr 11, 2014, we issued an updated research report on Arris Enterprises Inc. (ARRS). Strong demand for home gateways, large contract wins, coupled with the acquisition of the cable set-top box business of Motorola Mobility has transformed the company into an integrated equipment supplier in the high-speed video and Internet delivery market. As a result, the company raised its guidance for the next quarter of 2014.
Arris has delivered positive earnings surprises in three of the last four quarters, with an average beat of 41.84%. The company reported strong fourth-quarter 2013 financial results with both the top and the bottom line surpassing the Zacks Consensus Estimate.
With Motorola Mobility’s Cable Home business in its kitty, Arris is likely to become a formidable player in the video infrastructure and customer premises equipment for the cable TV industry. In the reported quarter, the company generated a whopping 248.6% year-over-year growth in revenues with both the Network and Cloud and CPE segments achieving 84.9% and 434.9% year-over-year improvement, respectively. On the back of such strong sales, Arris has also raised its revenue outlook for the next quarter of fiscal 2014.
On the downside, Arris is facing stiff competition from large video infrastructure gear manufacturing companies, namely, Cisco Systems, Inc. (CSCO) and LM Ericsson. Notably, customer concentration remains high for the company. In the fourth quarter of 2013, the two large cable TV operators, namely, Comcast Corp. (CMCSA) and Time Warner Cable (TWC) together accounted for 25.5% of the total revenue of Arris. Recently, Comcast is planning to acquire Time Warner Cable which is expected to significantly impact Arris’ top line in the upcoming quarters.
Arris currently carries a Zacks Rank #3 (Hold).
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