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CommScope-TESSCO Partner to Offer Safety Wireless Solutions

Zacks Equity Research

Reinforcing its long-term partnership, TESSCO Technologies Incorporated TESS has secured the first-year production capacity from CommScope Holding Company, Inc. COMM for its new public safety product — Bi-Directional Amplifier. Addressing the primary need for reliable and cost-effective public safety wireless systems, the product is expected to be shipped in late fourth-quarter 2019 or early first-quarter 2020.

The Collaboration

The alliance has primarily been undertaken as the State and local building authorities mandated public safety wireless systems in new and existing commercial structures during fires, floods and other emergencies. The available products in the market mostly offered no direct return on investments and often led to higher operating costs. This, in turn, provided an opportunity to both CommScope and TESSCO to jointly develop such products that will cater to the demand-supply gap.

CommScope’s new technology has been specifically designed to intercept signals over the air, creating minimal footprint within the building. It is software upgradeable and comes in a range of frequency band and power options, supports battery backup, and is fully compliant with National Fire Protection Association and National Electrical Manufacturers Association standards.

With CommScope expanding the product line in this category, TESSCO continues to build a competitive and robust public safety offering, leveraging on the strength of the long-standing partnership.

Core Focus

With the acquisition of ARRIS and Ruckus Networks, CommScope is well positioned to capitalize on the industry growth trends, including network convergence, fiber and mobility, IoT, demand for additional bandwidth, low latency and ultra-high reliability.

The company is making the best use of customer relationships and competitive position, paving the way for healthy mobility solutions business as communication service providers continue to establish their networks to increase capacity and coverage. It is expected to benefit from favorable networking market dynamics, while creating shareholder value.

Notably, given CommScope’s focus on sound technology, highly efficient supply chain and continuous improvement, it has emerged as a preferred partner for telecommunications businesses, as the industry shifts to 5G. With operators moving toward converged or multi-use network structures, combining voice, video and data communications into a single network, CommScope is actively developing solutions designed to support wireline and wireless network convergence, which is crucial for the success of 5G.

CommScope has long-term earnings growth expectation of 16.3%. The company topped earnings estimates thrice in the trailing four quarters, delivering average positive surprise of 11.3%. The stock has lost 26.2% compared with the industry’s decline of 12.3% in the past three months.

Zacks Rank & Stocks to Consider

CommScope currently has a Zacks Rank #3 (Hold). A couple of better-ranked stocks in the industry are Calix, Inc CALX and Zayo Group Holdings, Inc. ZAYO, both carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Calix is currently trading with a forward P/E of 87.6X.

Zayo is currently trading with a forward P/E of 45.7X.

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