Join        Login             Stock Quote

Cisco Systems (CSCO) Shares Attractive at Current Levels

 November 14, 2012 10:26 AM

(By Balaseshan) FBN Securities analyst Shebly Seyrafi said Cisco Systems Inc. (NASDAQ: CSCO) shares are especially attractive at current levels following the company's first quarter results. The brokerage retained its "outperform" rating with $25 price target.

Earnings for the first quarter were $2.09 billion, or $0.39 per share, up from $1.78 billion, or $0.33 per share, last year. Adjusted earnings per share (EPS) rose to $0.48 from $0.43, while the Street predicted $0.46. Sales increased 6 percent to $11.88 billion, beating market expectations of $11.77 billion.

For the second quarter, the company expects EPS of $0.47 to $0.48 and revenue growth of 3.5 percent to 5.5 percent, implying $11.9 billion to $12.2 billion in revenue. Consensus estimates call for EPS of $0.48 on revenue of $12.07 billion. The company beat revenue and EPS expectations, and is guiding revenue and EPS roughly in-line with expectations.

[Related -Citrix Systems, Inc. (NASDAQ:CTXS): A Look At Opportunities And Threats]

However, Seyrafi believes that CSCO is being conservative (particularly in gross margin). In products, switching and routing revenue continue to decline, but wireless and data center continue to post very strong growth.

Meanwhile services continues to grow at a double-digits percentage, the analyst noted. The bottom line is that CSCO did not disappoint on the report and the guide, and its margin performance was impressive. Therefore, he thinks that there will be some capitulation by the bears today.

[Related -Cisco Systems, Inc. (NASDAQ:CSCO): What Cisco May Add To Next-Gen UCS?]

With $5 per share of net cash (resulting in price-to-earnings excluding cash of only 5.5 times) and a dividend yield of over 3 percent ($0.56 per year annual dividend), shares are especially attractive at current levels. The only other real blemishes were the flat product order growth and the product book-to-bill being slightly below 1.0.

Seyrafi regards CSCO's strong wireless revenue (up 38% year-over-year) as indicative of strength in WLAN overall and view this data point as a positive for Aruba Networks Inc. (NASDAQ: ARUN), which reports Thursday evening.

The analyst said the weakness in NGN routing from service providers in EMEA, however, is an incremental negative for Juniper Networks Inc. (NYSE: JNPR). Telepresence was down in the mid-teens percentage, and he views this as an incremental negative for Polycom Inc. (NASDAQ: PLCM).

The brokerage lowered its 2013 EPS estimate for Cisco to $1.99 on revenue of $48.58 billion from $2.01 on revenue of $49.24 billion, and its 2014 estimate to $2.15 on revenue of $51.09 billion from $2.18 on revenue of $51.80 billion.

CSCO is trading up 6.29 percent at $17.91 on Wednesday. The stock has been trading between $14.96 and $21.30 for the past 52 weeks.

iOnTheMarket Premium


Post Comment -- Login is required to post message
Alert for new comments:
Your email:
Your Website:

rss feed

Latest Stories

article imageGoogle: Still Opportunities Ahead

Google (GOOGL) shares are finally recovering after announcing third-quarter earnings last week that were read on...

article imageThis Technical Indicator May Be The Simplest Way To Pick Winning Stocks

What's the first rule of successful real estate investing? Of course, you just said to yourself, "location, read on...

article imageUpdate On Crude Oil Markets

Crude prices came under pressure again today. According to Reuters (from last week), the Saudis “will read on...

article imageDelta Air Lines (DAL): Panic Selling Makes This Airline Stock Ripe For A Quick Pop

If there ever were a teaching moment in the stock market, it was this week. Earnings, trendlines and read on...

Popular Articles

Daily Sector Scan
Partner Center

Fundamental data is provided by Zacks Investment Research, and Commentary, news and Press Releases provided by YellowBrix and Quotemedia.
All information provided "as is" for informational purposes only, not intended for trading purposes or advice. iStockAnalyst.com is not an investment adviser and does not provide, endorse or review any information or data contained herein.
The blog articles are opinions by respective blogger. By using this site you are agreeing to terms and conditions posted on respective bloggers' website.
The postings/comments on the site may or may not be from reliable sources. Neither iStockAnalyst nor any of its independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. You are solely responsible for the investment decisions made by you and the consequences resulting therefrom. By accessing the iStockAnalyst.com site, you agree not to redistribute the information found therein.
The sector scan is based on 15-30 minutes delayed data. The Pattern scan is based on EOD data.