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Zayo to Boost Bank Connectivity for Bandwidth-Intensive Apps

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Zayo Group Holdings, Inc. (ZAYO - Free Report) recently secured a contract from an unnamed global investment bank to augment its network capabilities in Europe. Per the deal, Zayo will offer a private wavelength network to the financial services provider for seamless connectivity between several of its offices and data center locations.

A private wavelength network offers hassle-free utilization of the data resources along with the security, scalability and dependability of a private network without actually owning and operating the related infrastructure. It securely connects high-bandwidth facilities within a metro and/or between cities with flexible solutions for latency and diversity requirements.

The strategic deal seems to be the call of the hour as financial services firms worldwide continue migration from legacy copper networks to fiber-based connectivity solutions to support bandwidth-intensive applications. These include secure file sharing, large file transfers, business intelligence applications and data analysis. In addition to improved connectivity solutions, Zayo will provide round-the-clock support services to the bank.

Zayo is well poised to benefit from a diversified blue-chip customer base that comprises the largest and most sophisticated users of bandwidth. It aims to grow the network business at 5% and beyond while controlling expenses to boost OpEx efficiency. The company emphasizes on less than 12-month payback deals while leaning into strategic investments like e-rate deals, mobile infrastructure and long-haul fiber. Such deals leverage its existing assets in conjunction with new builds. These are likely to deliver strong free cash flow yields and attractive returns on invested capital.

Management is bullish about the prospects of its largest business segment, Fiber Solutions, as it is witnessing a very strong deal momentum. We also remain impressed with the inherent growth potential of this Zacks Rank #3 (Hold) company. Year to date, the stock has outperformed the industry with an average return of 44.1% compared with the 29.6% rally of the latter.

Some better-ranked stocks in the industry are Bandwidth Inc. (BAND - Free Report) , Harris Corporation and Motorola Solutions, Inc. (MSI - Free Report) , each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Bandwidth has a long-term earnings growth expectation of 10%. It beat earnings estimates in each of the last four quarters, the average positive surprise being 115.7%.  

Harris has a long-term earnings growth expectation of 8%. It beat earnings estimates in each of the preceding four quarters, the average surprise being 3%.
Motorola has a long-term earnings growth expectation of 7.7%. It beat earnings estimates in each of the preceding four quarters, the average surprise being 9.1%.

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