ARRIS International Displays Bright Prospects Amid Risks

On Dec 3, we issued an updated research report on ARRIS International plc (NASDAQ:ARRS) .

In the past three months, this Zacks Rank #3 (Hold) stock has yielded a return of 19.7% against the industry’s decline of 7.1%.

Existing Scenario

ARRIS is transforming the entertainment experience through a holistic approach to content delivery, leveraging its expertise in the cloud, network and home, to help providers anticipate demand for more personalized, relevant and mobile experiences. The company’s optical portfolio enables service providers to improve their networks by bringing fiber closer to subscribers for increased network speeds.

Also, the video portfolio offers a variety of pathways for delivering services through a combination of network-based video transcoding, packaging, storage and compression technologies required to deliver new IP video formats and home gateways to connected devices inside and outside the home. All these augur well for growth.

Through enterprise distribution channels, the company provides wireless and wired products and services for seamless connectivity across varied networking environments to customers across a spectrum of verticals, including hospitality, education, smart cities, government, venues, service providers and more.

Notably, the core solutions are complemented by a broad array of services, including technical support, repair and refurbishment, and system design and integration. In the past month, the Zacks Consensus Estimate for 2018 earnings has moved up from $2.91 to $2.95. This revision suggests that analysts are becoming more bullish on the company.

However, the massive year-over-year rise in operating expenses hurt the bottom line in third-quarter 2018. In the quarter, the company’s operating expenses recorded an increase of 18.8% year over year, primarily on account of higher SG&A expenses.

For the first nine months of 2018, the metric recorded an increase of 28.3% from the previous-year period. High costs have the potential to distort the earnings picture going forward as ARRIS continues to invest in new capabilities to gain market share.

Key Picks

Some better-ranked stocks from the same space are Arista Networks, Inc. (NYSE:ANET) , Knowles Corp. (NYSE:KN) and Viavi Solutions Inc. (NASDAQ:VIAV) . While Arista Networks currently sports a Zacks Rank #1 (Strong Buy), Knowles and Viavi Solutions carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Arista Networks surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the positive average earnings surprise being 13.35%.

Knowles exceeded the Zacks Consensus Estimate thrice in the trailing four quarters, the average positive earnings surprise being 11.04%.

Viavi Solutions outpaced the Zacks Consensus Estimate in each of the trailing four quarters, the positive average earnings surprise being 23.25%.

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