Cisco Systems, Inc.
) was assigned an A1 rating by leading credit rating agency Moody's
along with a stable outlook. Investors seemed unaffected by the
news as share price reaction was muted in the subsequent trading
The rating agency has assigned the A1 rating based on the Internet
protocol (IP) provider's strength in network equipment domain aided
by its broad and innovative product line, huge extent of operations
and distribution, end to end networking capabilities and advanced
technology development abilities. Despite growing competition from
several smaller players, these key points helped the company
sustain its market share.
In addition, the company's strong footing in the networking space,
cost efficiency and a sturdy balance sheet also influenced the
rating. The company has around $50.5 billion in cash and highly
liquid short-term investments, up $3.4 billion during the third
The company maintains very strong liquidity, with cash and
short-term investments at roughly 49.5% of total assets. This
enables the company to return value to shareholders through regular
share repurchases and dividends. Moreover, it helps the company to
invest aggressively to enlarge its core business and effectively
deal with competitive challenges.
Moody's assigned a stable outlook on the rating based on enhanced
operating performance by Cisco. The agency believes that its
improved performance will continue in the future too.
Rating affirmations or upgrades from credit rating agencies play an
important part in retaining investor confidence in the stock as
well as in maintaining credit worthiness in the market. Moody's A1
rating is an investment grade rating, indicating upper-medium grade
obligations with very low credit risk.
Cisco reported decent third-quarter results with revenues up 4.8%
sequentially to $8.8 billion, reflecting Cisco's superior strategy
and innovation. Even reported gross margin for the quarter was
60.7%, up 740 basis points (bps) sequentially. The sequential
increase was due to a favorable product mix and higher volumes.
Cisco currently holds a Zacks Rank #2 (Buy). Other better-ranked
stocks worth considering include
), sporting a Zacks Rank #1 (Strong Buy) and
Web.com Group, Inc.
), carrying a Zacks Rank #2.
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