October 27, 2009:
09:09 am ET ... S&P REITERATES STRONG BUY OPINION ON SHARES OF ARRIS GROUP (ARRS 11.45*****): Q3 EPS of $0.23 vs. $0.25 is in line with our estimate. Gross margins remained strong at 42%, up 5%, on a favorable product mix. We are impressed with ARRS' cash flow generation of $63M, and estimate its free cash flow yield at 12%, well above the peer mean. We see an industry upgrade cycle to DOCSIS 3.0 and a rapid rise in Internet traffic acting as strong growth drivers for ARRS. We see ARRS as one of the most compelling values in our coverage universe, given its attractive broadband market position.We keep our 12-month target price at $16, 15X our 2010 EPS estimate of $1.10. /A.Bensinger