Arris Misses Zacks Estimates - Analyst Blog
November 01 2011 - 10:15AM
Zacks
Arris Group Inc. (ARRS) declared weak
financial results for third-quarter 2011. Both top line and bottom
line fell below the Zacks Consensus Estimates.
EPS
GAAP net income in the third quarter of 2011 was $13.7 million
or 11 cents per share compared with a net income of $14 million or
11 cents per share in the prior-year quarter. Adjusted (excluding
special items) EPS, in the reported quarter was 17 cents, a penny
shy of the Zacks Consensus Estimate.
Revenue
Quarterly total revenue was $274.4 million, remaining flat year
over year but failed to meet the Zacks Consensus Estimate of $280
million. Quarterly Domestic revenue was 66.2% and International
revenue was 33.8%. Comcast Corp. (CMCSA) and
Time Warner Cable Inc. (TWC) together constituted
41.6% of total third-quarter revenue.
Margins
Quarterly gross margin came in at 36.5% compared with 37.2% in
the year-ago quarter. Operating income, in the third quarter
of 2011, was $18.5 million compared with $24 million in the
prior-year quarter. Quarterly operating margin was 6.7% compared
with 8.7% in the year-ago quarter.
Cash Flow
Arris generated $24.5 million of cash from operation during the
third quarter of 2011 compared with $12.5 million in the prior-year
quarter. Quarterly free cash flow (cash flow from operation less
capital expenditure) was $18.1 million compared with $5.7 million
in the year-ago quarter.
Balance Sheet
At the end of the third quarter of 2011, Arris had $575 million
of cash & marketable securities on its balance sheet compared
with $620.1 million at the end of fiscal 2010. Total debt was
$206.8 million at the end of the reported quarter compared with
$202.6 million at the end of fiscal 2010. At the end of the third
quarter of 2011, debt-to-capitalization ratio was 0.17 compared
with 0.17 at the end of fiscal 2010.
Order Backlog and Book-to-Bill
Total order backlog of Arris, at the end of the third quarter of
2011, was $155.3 million compared with $119.6 million at the end of
the prior-year quarter. Book-to-bill ratio was 1.00 in the reported
quarter compared with 0.80 in the prior-year quarter. In the
previous quarter, Arris repurchased approximately 1.6 million of
its common outstanding shares for a total consideration of $17.1
million.
Broadband Communications Systems Segment
Quarterly revenue was $203.6 million, remaining flat year over
year. Quarterly gross margin was 37.3% compared with 37.2% in the
year-ago quarter. Arris shipped 1.4 million CPE units, 53% of which
are DOCSIS 3.0. The company also shipped 73,686 C4 CMTS downstream
ports.
Access, Transport, & Supplies Segment
Quarterly revenue was $54.2 million, up 13.9% year over year.
Quarterly gross margin was 25.3% compared with 26.3% in the
year-ago quarter.
Media & Communication System Segment
Quarterly revenue was $16.6 million, down 27.5% year over year.
Quarterly gross margin was 63.3% compared with 59.6% in the
year-ago quarter.
Future Financial Outlook
Management’s guidance for net sales in the fourth quarter of
2011 will be within the range of $270 million - $290 million. EPS,
on a GAAP basis, are expected within the range of 8 cents to 12
cents. EPS, on a non-GAAP basis, are expected within the range of
18 cents to 22 cents. This includes stock-based compensation
expenses of 3 cents per share.
Recommendation
We maintain our long-term Neutral recommendation on Arris.
Currently, it holds a short-term Zacks #3 Rank (Hold) on the
stock.
ARRIS GROUP INC (ARRS): Free Stock Analysis Report
COMCAST CORP A (CMCSA): Free Stock Analysis Report
TIME WARNER CAB (TWC): Free Stock Analysis Report
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