So far, so good. It's only mid-February, and Arris shares have gained a market-stomping 22%. Still, with the stock approaching the upper bounds of the price target set for it months ago, is there gas left in this company's growth engine?
Last week's fourth-quarter report certainly didn't hurt any. The maker of broadband equipment beat analyst estimates on both the top and bottom lines, and issued mildly optimistic guidance for an encore. Non-GAAP earnings fell 40% to $0.19 per share on 11% lower revenue, which may sound like bad news until you consider that both Time Warner Cable (NYSE: TWC ) and Comcast (Nasdaq: CMCSA ) rolled out next-generation cable equipment in 2009. It was a tough comparison.
Arris is making up for those sorely missed revenue streams by diversifying worldwide. Cable communications is a tough market where Cisco Systems (Nasdaq: CSCO ) has reported some trouble recently and Chinese manufacturers are rising, led by Huawei. But Arris is a longtime leader in certain segments of the field and doesn't expect to lose that throne anytime soon.
You may have noticed that I see the future of entertainment as all digital, all the time. Arris is on board with that vision and is excited about the sales prospects for a "game-changing" home network gateway that paves the way for an all-IP broadcasting future. There are already orders for this product on the books, and three customers have committed to buying this networking gateway. Preach it, brother!
You don't need robotic eyes to see that the future is written in ones and zeroes and that Arris owns an important piece of that puzzle. For more details, I'd refer you back to that free report again.