Arris Group Inc., Comcast Corp., Google Inc., Royal Caribbean Cruises Ltd and Carnival Corp. highlighted in Zacks Analyst Blog
CHICAGO, Jan. 17, 2013 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include Arris Group Inc. (ARRS), Comcast Corp. (CMCSA), Google Inc. (GOOG), Royal Caribbean Cruises Ltd (RCL) and Carnival Corp. (CCL).
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Here are highlights from Thursday's Analyst Blog:
Arris Forges Strategic Alliance
In a major strategic move, Arris Group Inc. (ARRS) entered into an agreement to sell approximately 10.6 million of its common stock to Comcast Corp. (CMCSA). The total consideration of the deal is $150 million. The cable TV equipment vendor stated that this agreement is part of its previously announced acquisition of the cable set-top box business of Motorola Mobility, a subsidiary of Google Inc. (GOOG).
Last December, Arris decided to purchase the set-top box business of Motorola Mobility for $2.35 billion. Of this, $2.05 billion will be paid in cash and $300 million worth common stock of Arris will be given to Google. The Comcast deal will reduce the total number of Arris' shares to be issued to Google while raising the cash consideration by $150 million.
Consequently, both Comcast and Google will command 7.85% of the total outstanding shares of Arris. The completion of the Comcast deal is subject to the successful transition of the Motorola cable set-top business to Arris, expected to take place by the second quarter of 2013.
The important feature of this deal is that Arris will get two large companies namely Comcast and Google as its investors that have financial interest in the success of its cable set-top box venture. Notably, Comcast is the largest customer of Arris. Presently, Arris is a small contender in the high-speed video and Internet delivery market.
The acquisition of the Motorola set-top box business will undoubtedly help Arris strengthen its foothold in the video offerings market. Further, this deal will strengthen Arris' patent portfolio and provide access to several patents of Motorola Mobility.
Currently, Arris, Comcast and Google have a long-term Neutral recommendation. While Comcast and Google have a Zacks Rank #3 (Hold) for the short term, Arris has a Zacks Rank #2 (Buy).
Royal Caribbean Hits 52-Week High
Shares of Royal Caribbean Cruises Ltd. (RCL) reached a 52-week high of $36.25 on Tuesday, Jan 15, 2013, just before it is due to report fourth quarter 2012 earnings release later this month, beating its previous 52-week high of $36.18. The closing price of the second largest cruise company on Jan 15, 2013, was $36.20, representing a solid one-year return of about 36.2% and year-to-date return of about 2.3%. The average volume of shares traded over the last three months stands at approximately 1,972K.
A strong business model, a slight competitive advantage over its closest peer Carnival Corp. (CCL), following the latter's Costa Concordia ship grounding disaster, improvement in booking scenario and exposure to the under-penetrated Asian markets, are the major growth drivers for the shares of Royal Caribbean.
Being the second largest company in the industry, Royal Caribbean enjoys a competitive advantage over many of its industry peers. In fact, after the grounding of the industry's leading operator Carnival's ship Costa Concordia in mid-January 2012, Royal Caribbean got a better exposure both on bourse and business, though that tragic incident had a negative impact on the entire sector. After a year of the disaster, the sector has started to revive from shattered passenger confidence and recouped from extreme upheaval.
Although Europe still remains a tough market, overall bookings for the fourth quarter of 2012 and for 2013 across all itineraries remained strong, with year-over-year higher load factors and pricing. Caribbean yields are anticipated to have finished year 2012 on higher note than the 2008-level.
Of late, the Asian market has become the area of focus for the company. The company plans to cater to some under-served ports in China, which have far lower penetration rate compared to cruise markets in the United States and Europe.
Concurrent to its third quarter earnings release, Royal Caribbean increased its full-year guidance that that resulted in an upward movement in estimates for the fourth quarter.
Valuation is Attractive
Royal Caribbean currently trades at a forward P/E of 17.40x, 11.9% discount to the peer group average of 19.75x. Again, its price-to-sales ratio of 1.03x is trading at a 12.0% discount to the peer group average 1.17x. The company's price-to-book ratio of 0.91x is also lower than peer group average of 1.13x.
Hence, we believe compelling fundamentals helped the stock reach its 52-week high. Having said this, we are expecting the company to report decent quarterly results later this month.
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