Arris Group Shares Plunged: What You Need to Know

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of communications technology company Arris Group (Nasdaq: ARRS  ) fell 10% today after the company released disappointing earnings.

So what: First-quarter revenue of $267.4 million missed expectations by $2.1 million, and earnings per share of $0.16 missed by a penny. Topping it off, the company expects second-quarter earnings per share to range between $0.16 and $0.20, at the bottom end of expectations.

Now what: The earnings miss on revenues and EPS was small, but investors are fixated on the outlook today. It may be at the bottom end of what analysts were expecting, but it still leaves plenty of upside for investors. Arris doesn't have a long history of missing expectations, and if it meets forward estimates, shares only trade at an 11.6 forward P/E ratio -- a good value for opportunistic investors.

Interested in more info on Arris Group? Add it to your watchlist.

Fool contributor Travis Hoium does not have a position in any company mentioned. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings or follow his CAPS picks at TMFFlushDraw.

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Read/Post Comments (14) | Recommend This Article (4)

Comments from our Foolish Readers

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  • Report this Comment On April 28, 2011, at 3:54 PM, BugBeater wrote:

    This article was welcomed as today's 10 plus percent drop was more than disappointing.

    I would appreciate a clearer discussion as to what MF currently recommends for share holders of this 2011 favorite stock of the entire MF group of experts.

    Looking forward to a better explanation.

    BugBeater

  • Report this Comment On April 28, 2011, at 5:21 PM, Atlas2010 wrote:

    ^ I second this.

  • Report this Comment On April 28, 2011, at 6:07 PM, cpoehlman wrote:

    Motley Fool gave no warning of an impending problem with their top pick stock of 2011. Very disappointing top say the least!

  • Report this Comment On April 28, 2011, at 6:13 PM, ovhenderson wrote:

    I think the Fool is saying, ARRS isn't that far off, and that now is a perfect time to score on this sale.

  • Report this Comment On April 28, 2011, at 7:50 PM, TruffelPig wrote:

    Yeah, maybe ov henderson, but why would I want to bet on a company with many earning misses in recent history. This is not the first one. And that CSCO is beating them up is a tad surprizing. CSCO seems to have better network equipment that came out and ARRS had to decrease price and margins not to lose % share in Mr. market. ARRS seems optimistic, some analysts not so. I am not sure why ARRS should be such an outstanding company, honestly. It looks ok to may, but not really outstanding and definitely not like the pick of the year.

    I think what happened is that network was hot early this year and end of last year with all that internet growth. Since then major spankings have occurred (see AKAM today, FNSR, JDSU recently etc etc) and that sector is iffy. ARRS had a low P/E last year so it seemed that ARRS will do some catching up. Don't think that will happen with Mr. Market gone sour a bit in that segment.

    Resume: While I think that ARRS is cheap right now, it might actually get cheaper still. I am actually more a HLIT fan in that segment. I owned ARRS earlier this year but got rid of them a while ago when the network market came down. I still made the big mistake of having MIPS shares though.....argh.......network chips is also a area too hot for any failure in earnings. I lost 10% on those before I could terminate those.

  • Report this Comment On April 29, 2011, at 2:24 AM, Gr8Writer wrote:

    From The Motley Fool's Top Stock of 2011 Report,

    "Using a free-cash-flow-to-firm model, top Motley Fool analyst Nick Crow values Arris as high as $15 per share, which is nearly 20% higher than its recent $12.50 price."

    Considering that today's $11.70 price is even cheaper than the Report's $12.50 price mentioned in the report, I'd be very interested to hear whether or not Nick -- or any other TMF analyst -- believes that the same thesis still holds true today.

  • Report this Comment On April 29, 2011, at 11:59 AM, ovhenderson wrote:

    I would too Gr8Writer

  • Report this Comment On April 29, 2011, at 5:25 PM, baekeland108 wrote:

    I would also --Gr8Writer.

  • Report this Comment On April 30, 2011, at 1:45 PM, TruffelPig wrote:

    Harmonics got spanked too. Obviously a weakness of the industry in broadband. Should get better soon.

  • Report this Comment On April 30, 2011, at 8:11 PM, Wease118 wrote:

    Still waiting for any TMF analyst to comment. I'm new here. Do they comment here?

  • Report this Comment On May 03, 2011, at 11:23 AM, BENNIEBOCK2 wrote:

    what you are forecasting is that the stock ARRIS, is down because the marekt evaluates missing the mark by a minimum amount more harshly than in prior scary years, But, you failed to mention that the stock downside was in earnings when you recommended it. Rather, you said that at some point it might not perform as you hoped. That old market philosophy of never buy on the downside is implicated in your analysis. If the stock is a dog, you ought to own up to it.

  • Report this Comment On May 10, 2011, at 10:11 PM, altabird8991 wrote:

    Still waiting for a comment by a TMF analyst on the state of Arris.

  • Report this Comment On May 11, 2011, at 11:58 AM, jpherold wrote:

    Thought, I'd surely be safe buying into the #1 Stock from TMF. I'd sure like them to come back and comment more on recent events and where they see the stock price at eoy.

  • Report this Comment On May 15, 2011, at 12:12 PM, dmarkiv wrote:

    Don"t panic! I believe that stocks are like living things; when they expend a lot of energy they need to do a stint on the porch swing and build up the energy level. Toni Turner calls some of the consolidations "Stealthy Sidewinders" , The Elliot Wave theory calls them ZigZags, Flats and Triangles, Stan Weinstein calls the ones that follow a "Stage 3" a consolidation. His cure for a consolidation is to watch several factors. Read his book to learn good technical techniques. ANY WAY ARRS looks to be near one of those breakouts. Hope so.

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