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ARRIS (ARRS) Down 3.1% Since Earnings Report: Can It Rebound?

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It has been about a month since the last earnings report for ARRIS International PLC (ARRS - Free Report) . Shares have lost about 3.1% in that time frame, underperforming the market.

Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Second Quarter Earnings

ARRIS’ second-quarter 2017 earnings of $0.63 per share beat the Zacks Consensus Estimate by $0.05. Earnings however declined from the year-ago quarter due to lower revenues.

Revenues of $1,664.2 million fell marginally short of the Zacks Consensus Estimate of $1,664.9 million. Moreover, the top line declined 3.81% on a year-over-year basis.

Performance Details

Quarterly gross margin (on an adjusted basis) of the company was 24.6%, compared with 27.2% in the year-ago quarter. Total order backlog at the end of the quarter under review was $1.326 billion, as compared with $1.239 billion at the end of the year-ago quarter. Additionally, book-to-bill ratio was 1.01, compared with 0.94 in the prior-year quarter. At the end of the second quarter, ARRIS generated cash from operating activities of $243.6 million, compared with $260.8 million a year ago.

The company exited the reported quarter with cash and cash equivalents of approximately $1.346 billion, compared with $1.126 billion at the end of the first quarter of 2017.

Long-term debt & financing lease obligations (net of current portion) was $2.134 billion, compared with approximately $2.18 billion at 2016-end. The company bought back 1.7 million shares for $44 million in the reported quarter.

Guidance

ARRIS expects earnings (adjusted) in the band of $0.66-$0.71 in the third quarter of 2017. Revenues are expected in the band of $1,740–$1,790 million. For full-year 2017, earnings (adjusted) are still expected in the band of $2.40–$2.60 and revenues in the range of $6,615 - $6,830 million. 

How Have Estimates Been Moving Since Then?

Analysts were quiet during the last month as none of them issued any earnings estimate revisions.

VGM Scores

At this time, ARRIS' stock has a great Growth Score of A, though it is lagging a bit on the momentum front with a B. The stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Based on our scores, the stock is equally suitable for value and growth investors while also being suitable for those looking for momentum.

Outlook

The stock has a Zacks Rank #3 (Hold). We expect in-line returns from the stock in the next few months.




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