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Cisco (CSCO) Looks Promising on Upbeat Q2: Should You Buy?
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A successful investor understands the importance of adding well-performing stocks in the portfolio at the right time. Notably, indicators of a stock’s bullish run include a rise in share price and strong fundamentals.
Cisco Systems Inc. (CSCO - Free Report) is one such technology stock that has been on healthy growth trajectory, of late. The company’s shares have returned 29.3% year over year, outperforming the 28.1% rally of the industry.
Let’s delve deeper and take a look at some of the factors aiding the performance.
Positive Earnings Surprise History
Cisco has an impressive earnings surprise history. The company outpaced the Zacks Consensus Estimate in three of the trailing four quarters, delivering a positive earnings surprise of 2.9%.
Further, it has a long-term expected EPS growth rate of 5%.
Upward Estimate Revisions
In the last 30 days, the Zacks Consensus Estimate for Cisco’s current year witnessed upward revisions. The Zacks Consensus Estimate for current year is pegged at $2.51 per share compared with $2.46 per share projected 30 days ago.
Valuation Looks Impressive
On the valuation front too, the stock looks attractive. The company currently trades at a forward P/E multiple of 19.9x, significantly lower than the Zacks industry’s average of 25.4x. The ratio, which is obtained by dividing a stock’s current market price with its historical or estimated earnings, measures how much an investor needs to shell out per dollar of earnings. Consequently, the lower the P/E of a stock, the better it is for a value investor.
Q2 Upbeat
Cisco delivered second-quarter fiscal 2018 non-GAAP earnings of 63 cents per share beating the Zacks Consensus Estimate of 59 cents. Further, the figure increased 6 cents from the year-ago quarter of 57 cents.
Revenues increased 3% year over year to $11.887 billion and marginally surpassed the Zacks Consensus Estimate of $11.817 billion. Acquisitions contributed 80 basis points (bps) to revenue growth in the quarter. Security, Infrastructure Platforms and Applications revenues increased in the quarter.
Management also provided positive top-line guidance for third-quarter fiscal 2018 based on order strength and improving traction of the subscription-based model.
For third-quarter fiscal 2018, revenues are projected to increase 3-5% on a year-over-year basis. Non-GAAP earnings are anticipated between 64 cents and 66 cents per share. The Zacks Consensus Estimate for earnings is pegged at 62 cents, while that for revenues is at $12.18 billion.
Other Driving Factors
During the quarter, the company closed its previously announced acquisition of BroadSoft for $1.9 billion. The planned buyout of Broadsoft will boost the company's recurring revenue base.
Cisco also completed the acquisition of Skyport Systems during the quarter.
The company also witnessed enhanced product adoption. The majority of the companies including the likes of Ameritas and Orange selected Cisco to improve IT security, and enhance work processes and automation.
The company also announced various product innovations and partnership programs during the quarter. With emphasis on multicloud, the company announced its HyperFlex platform and Container Platform, which is expected to further expand product portfolio. The company is also reportedly working on a hyperconnected car in collaboration with Hyundai, which will help it in penetrating the smart-vehicle solutions market.
We believe that Cisco’s expanding footprint in the rapidly growing security market looks promising. The company’s security solutions continue to add customers. Additionally, the company’s partnerships with Viacom , Alphabet’s (GOOGL - Free Report) division Google and Alibaba (BABA - Free Report) will help Cisco gain significant traction in the cloud and IoT space in the long run.
Cisco’s extended partnerships with the likes of Apple, IBM and Microsoft are also likely to bolster growth, particularly in the cloud and IoT. Moreover, Cisco joined forces with Aon and Allianz to provider better cyber risk management solutions for business, which is another positive for the company.
Bottom Line
Looking at these positives, we believe that Cisco is one technology stock that deserves a place in investors’ portfolio.
Consequently, investing in this stock can yield returns in the short term.
It's hard to believe, even for us at Zacks. But while the market gained +18.8% from 2016 - Q1 2017, our top stock-picking screens have returned +157.0%, +128.0%, +97.8%, +94.7%, and +90.2% respectively.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - Q1 2017, the composite yearly average gain for these strategies has beaten the market more than 11X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
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Cisco (CSCO) Looks Promising on Upbeat Q2: Should You Buy?
A successful investor understands the importance of adding well-performing stocks in the portfolio at the right time. Notably, indicators of a stock’s bullish run include a rise in share price and strong fundamentals.
Cisco Systems Inc. (CSCO - Free Report) is one such technology stock that has been on healthy growth trajectory, of late. The company’s shares have returned 29.3% year over year, outperforming the 28.1% rally of the industry.
Let’s delve deeper and take a look at some of the factors aiding the performance.
Positive Earnings Surprise History
Cisco has an impressive earnings surprise history. The company outpaced the Zacks Consensus Estimate in three of the trailing four quarters, delivering a positive earnings surprise of 2.9%.
Further, it has a long-term expected EPS growth rate of 5%.
Upward Estimate Revisions
In the last 30 days, the Zacks Consensus Estimate for Cisco’s current year witnessed upward revisions. The Zacks Consensus Estimate for current year is pegged at $2.51 per share compared with $2.46 per share projected 30 days ago.
Valuation Looks Impressive
On the valuation front too, the stock looks attractive. The company currently trades at a forward P/E multiple of 19.9x, significantly lower than the Zacks industry’s average of 25.4x. The ratio, which is obtained by dividing a stock’s current market price with its historical or estimated earnings, measures how much an investor needs to shell out per dollar of earnings. Consequently, the lower the P/E of a stock, the better it is for a value investor.
Q2 Upbeat
Cisco delivered second-quarter fiscal 2018 non-GAAP earnings of 63 cents per share beating the Zacks Consensus Estimate of 59 cents. Further, the figure increased 6 cents from the year-ago quarter of 57 cents.
Revenues increased 3% year over year to $11.887 billion and marginally surpassed the Zacks Consensus Estimate of $11.817 billion. Acquisitions contributed 80 basis points (bps) to revenue growth in the quarter. Security, Infrastructure Platforms and Applications revenues increased in the quarter.
Management also provided positive top-line guidance for third-quarter fiscal 2018 based on order strength and improving traction of the subscription-based model.
For third-quarter fiscal 2018, revenues are projected to increase 3-5% on a year-over-year basis. Non-GAAP earnings are anticipated between 64 cents and 66 cents per share. The Zacks Consensus Estimate for earnings is pegged at 62 cents, while that for revenues is at $12.18 billion.
Other Driving Factors
During the quarter, the company closed its previously announced acquisition of BroadSoft for $1.9 billion. The planned buyout of Broadsoft will boost the company's recurring revenue base.
Cisco also completed the acquisition of Skyport Systems during the quarter.
The company also witnessed enhanced product adoption. The majority of the companies including the likes of Ameritas and Orange selected Cisco to improve IT security, and enhance work processes and automation.
The company also announced various product innovations and partnership programs during the quarter. With emphasis on multicloud, the company announced its HyperFlex platform and Container Platform, which is expected to further expand product portfolio. The company is also reportedly working on a hyperconnected car in collaboration with Hyundai, which will help it in penetrating the smart-vehicle solutions market.
We believe that Cisco’s expanding footprint in the rapidly growing security market looks promising. The company’s security solutions continue to add customers. Additionally, the company’s partnerships with Viacom , Alphabet’s (GOOGL - Free Report) division Google and Alibaba (BABA - Free Report) will help Cisco gain significant traction in the cloud and IoT space in the long run.
Cisco’s extended partnerships with the likes of Apple, IBM and Microsoft are also likely to bolster growth, particularly in the cloud and IoT. Moreover, Cisco joined forces with Aon and Allianz to provider better cyber risk management solutions for business, which is another positive for the company.
Bottom Line
Looking at these positives, we believe that Cisco is one technology stock that deserves a place in investors’ portfolio.
Consequently, investing in this stock can yield returns in the short term.
Zacks Rank
Cisco carries a Zacks Rank #2 (Buy).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +18.8% from 2016 - Q1 2017, our top stock-picking screens have returned +157.0%, +128.0%, +97.8%, +94.7%, and +90.2% respectively.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - Q1 2017, the composite yearly average gain for these strategies has beaten the market more than 11X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
See Them Free>>