The Zacks Analyst Blog Highlights: FedEx, Boeing, Arris Group, Comcast and Time Warner Cable

CHICAGO, Oct. 11, 2012 /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 FedEx Corporation (NYSE: FDX), The Boeing Company (NYSE: BA), Arris Group Inc. (Nasdaq: ARRS), Comcast Corp. (Nasdaq: CMCSA) and Time Warner Cable Inc. (NYSE: TWC).

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Here are highlights from Wednesday's Analyst Blog:

FedEx Sets Profitability Target

Leading parcel delivery companyFedEx Corporation (NYSE: FDX) announced its target to achieve $1.7 billion in incremental profit by the end of 2016. Although no broad-based plan has yet been declared, it is expected that the company's profit enhancement is broadly based on cost improvements.  

We believe the current market scenario of lower demand, focusing on cost reduction bodes well for improving profits.  Not only will it mean higher margins for the company but also imply service improvement by increasing productivity within its network of operation.

FedEx is continuously registering demand shift from premium services to deferred services impacting margins negatively. The global economic impact triggered by European debt crisis and slump in Asian growth is resulting in poor shipments across the package delivery industry.

Given these factors, FedEx seeks to realign it network that adjusts with the current demand trend.  In accordance with its productivity plans made in June 2012, the company announced its intention to purchase 19 more The Boeing Company's (NYSE: BA) 767 aircraft. FedEx expects the delivery of these aircraft from 2015 through 2019.

These new aircraft are expected to benefit cost structure by replacing the old fleet of MD-10 and A31-200. The 767 Boeing will provide similar capacity compared to MD10 with 20% and 30% reductions in operating cost and fuel cost, respectively. Further, the new planes will add cost efficiency by exchanging equipment like spare parts, tooling and flight simulators with the existing FedEx's Boeing 757 Fleet.

Additionally, FedEx delayed the delivery of eleven 777 freighter aircraft that were scheduled to be delivered between 2013 through 2018. We believe the delayed deliveries would help better utilization of MD-11 fleet on international flights and lower overall cost and investment.

Apart from fleet restructuring at FedEx Express, the company also has plans for productivity enhancements in its Ground segment. It aims to add more technology driven operations at ground such as the automation in planning and execution of free load as well as the pickup and delivery processes.

The segment's trailers are also expected to be equipped with GPS devices to improve fleet management. In the Freight segment, management also plans to invest in technology to upgrade network and equipment and automation planning to enhance service levels in fiscal 2013.

However, we believe these cost improvement plans would incur certain capital expenditures such as deployment of fuel efficient aircraft as well as incorporating new automation technologies. In such an event weak economic conditions coupled with investment in resource enhancement may jeopardize the profitability through adding cost over the near term and can thus back-fire the company's profitability plan.

Arris Unveils Release 8.1 Sotware

Arris Group Inc. (Nasdaq: ARRS), a global technology leader in the development of next-generation high-speed data network, has unveiled the Release 8.1 software for its industry leading Cable Modem Termination System (CMTS) business. The latest offering will augment the performance of its existing C4 CMTS and C4c CMTS line of products.  

Release 8.1 along with the System Control Module 3 (SCM) provides certain improved features including higher performance for control plane related tasks like IP Detailed Record (IPDR), Simple Network Management Protocol (SNMP) and Command Line interface among others. Additionally, this feature rich software can support DOCSIS 3.0 upstream channel bonding with IPv6 capabilities.

CMTS is an equipment, typically placed in a piece of headend and are used to provide high speed data services over cable internet or voice-over Internet Protocol (VOIP) technology. Arris C4 CMTS along with its upgraded features support upstream services in as low as 5 MHz frequency and as high as 85 MHz, thereby enabling operators to use more spectrums for future services in a cost effective manner. The company has shipped 75,662 C4 CMTS downstream ports in the second quarter of 2012.

Arris will benefit from the intense competition between cable operators, satellite carriers and telecom service providers for broadband market share. As residential VoIP and HDTV services continue to grow, operators have started dealing with increased network traffic, resulting from robust demand for video download and file sharing. We believe Release 8.1 software will be a value addition to Arris's already popular CMTS product line and will strengthen its already impressive order book.

Arris' second quarter 2012 revenue was $349.3 million, up 31.4% year over year and 2.1% from the Zacks Consensus Estimate of $342.0 million. Domestic revenue for the quarter was 74%, while International revenue was 26%. Two of Arris' biggest clients – Comcast Corp. (Nasdaq: CMCSA) and Time Warner Cable Inc. (NYSE: TWC) – together constituted 49.1% of the total second-quarter revenue.

We are maintaining our long-term Neutral recommendation on Arris Group Inc. The company also retains a Zacks #3 Rank, implying a short-term Hold rating.

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