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ARRIS (ARRS) Q4 Earnings Surpass Estimates, Revenues Miss


ARRIS International plc’s ARRS fourth-quarter 2017 earnings (excluding 81 cents from non-recurring items) of 88 cents per share beat the Zacks Consensus Estimate of 77 cents. Also, the bottom line improved 11.4% more than the year-ago quarter.

The earnings beat and its year-over-year increase seem to have pleased investors. As a result, shares of the company rose 4.2% in after-hours trading on Feb 14.

Revenues of $1,738.6 million fell short of the Zacks Consensus Estimate of $1,760.8 million. Moreover, the top line declined 1.2% year over year.

Performance Details

Quarterly gross margin (on an adjusted basis) of this Suwanee, GA-based company was 28.8% compared with 25.6% in the prior-year quarter. Total order backlog at the end of the quarter under review was $1.12 billion compared with $1.11 billion at the end of the comparable quarter last year. Additionally, book-to-bill ratio was 1.02 compared with 1.04 in the year-earlier quarter.

During the fourth quarter, ARRIS’ cashflow from operating activities came in at $77.8 million compared with $35.3 million, generated a year ago. Moreover, the company exited the reported quarter with cash and cash equivalents of approximately $487.57 million, lower than $980.12 million at the end of 2016. Approximately $822 million of cash resources were used to complete the acquisition of Ruckus Networks from Broadcom AVGO in December 2017. This buyout is expected to be value accretive to the acquirer’s earnings in the first year.

Long-term debt & financing lease obligations (net of current portion) were $2.12 billion compared with approximately $2.18 billion at 2016-end. The company bought back 1.9 million shares for $50 million in the quarter under discussion.

Notably, ARRIS bought back 7.5 million shares for $197 million during 2017.

ARRIS International PLC Price, Consensus and EPS Surprise

ARRIS International PLC Price, Consensus and EPS Surprise | ARRIS International PLC Quote

Q1 & 2018 Guidance

The company expects revenues in the range of $1.575-$1.625 billion for the first quarter of 2018. While earnings (adjusted) for the same period are estimated at 50-$55 cents per share. The Zacks Consensus Estimate for first-quarter earnings is pegged at 59 cents on revenues of $1.74 billion.

For 2018, the company anticipates revenues between $7.100 billion and $7.350 billion. Whereas earnings (adjusted) are projected between $2.80 and $3.05 per share. The Zacks Consensus Estimate for current-year earnings stands at $2.96 on revenues of $7.33 billion.

Zacks Rank & Key Picks

ARRIS carries a Zacks Rank #4 (Sell).

Two better-ranked stocks in the same space are Arista Networks, Inc. ANET and AudioCodes Ltd. AUDC, both carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Shares of Arista Networks and AudioCodes have rallied more than 77% and 18%, respectively, in the last six months.

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