Shares of Cisco CSCO have surged 36% over the last year to crush the S&P 500 and its industry's average. Now the question is can the historic tech giant keep up its impressive momentum with a strong fiscal first quarter?
Let's take a look to help understand if Cisco stock might be worth buying ahead of its quarterly earnings release Wednesday.
Cisco is coming off a strong fiscal fourth quarter and a solid year. The firm posted quarterly revenues of $12.8 billion, which marked a 6% jump. Meanwhile, Cisco's adjusted quarterly earnings climbed 15%. The company's largest unit, infrastructure platforms, popped 7% to $7.443 billion. The firm's two biggest growth divisions were applications, up 10% and security up 12% to $627 million.
Investors should also note that Cisco has completed four acquisitions this calendar year. The tech power's $2.35 billion purchase of Duo Security, which was made official in early October, should help expand its IT and data security businesses. And this purchase will only become more vital going forward as cyber security becomes paramount. "Duo's SaaS delivered solution will expand our cloud security capabilities to help enable any user on any device to securely connect to any application on any network," CEO Chuck Robbins told analysts on Cisco's Q4 earnings call.
"Security continues to be our customers number one concern and it is a top priority for us. Our strategy is to simplify and increase security efficacy through an architectural approach with products that work together and share analytics and actionable threat intelligence."
Looking ahead, Cisco might continue to use some of its repatriated cash to keep its acquisition streak rolling. This list could possibly include companies like Juniper Networks JNPR , Arista ANET , FireEye FEYE , and others.
Cisco is not alone in its pursuit of new tech. IBM IBM , Microsoft MSFT , Adobe ADBE , and others have spent billions to acquire innovative tech companies.
Stock Price Movement
Shares of CSCO have climbed roughly 177% over the last ten years, which falls behind its industry's 282% climb and the S&P 500's 216% jump. Yet, Cisco stock has overtaken its industry and the S&P during the last three years.
As we mentioned at the top, shares of CSCO have surged 36% over the last 52 weeks and 20% since the start of the year. Shares of Cisco closed Friday at around $47.11 per share, down roughly 5% from their 52-week high of $49.47. It is worth noting that Cisco stock dropped roughly 2.5% through early afternoon trading Monday as part of a larger market downturn. This could set up a better buying opportunity for investors high on Cisco.
Moving on, Cisco's recent success has caused its valuation picture to appear just a tad bit stretched at the moment, although it is hardly out of control. Cisco is currently trading at 17.2X forward 12-month Zacks Consensus EPS estimates, which marks a premium compared to its industry's 14.2X average and the S&P's 16.6X. CSCO is also trading below its peer group's-which includes NetGear NTGR and Extreme Networks EXTR -17.7X.
Cisco has traded as high as 19.2X over the last year. But we should note CSCO has a one-year median of 16.8X and has traded as low as 12.9X. Plus, we can see that Cisco currently rests not too far off its five-year high.
Q1 Outlook & Earnings Trends
Cisco is projected to see its fiscal first quarter revenues pop by 6.06% to hit $12.87 billion, based on our current Zacks Consensus Estimate. More specifically, Cisco's key infrastructure platforms unit is projected to jump roughly 6.4% from $6.97 billion in the year-ago period to reach $7.416 billion, based on our NFM estimates. The company's faster-growing security business is expected to expand by 11.4% from $585 million to $651.83 million
At the other end of the income statement, Cisco is projected to see its adjusted quarterly earnings come in at $0.72 per share, which would mark a 18% surge. Investors should note that Cisco has received one upward earnings estimate revision over the last 60 days, against zero downward changes. We can, however, see that Cisco's earnings picture has turned much more positive over the last 90 days.
Cisco is currently a Zacks Rank #3 (Hold) and sports a "B" grade for Growth in our Style Scores system. The company also has a strong earnings history, which includes four straight quarterly beats.
Let's also not forget that Cisco is a dividend payer, having paid a $0.33 per share quarterly dividend during the 2018 calendar year, up from $0.29 in 2017. Therefore, Cisco might be worth thinking about as a tech stock that has seen its share price surge, while also paying a dividend. Plus, Cisco is trading below where it has recently.
Cisco is scheduled to release its fiscal Q1 financial results after the closing bell on Wednesday, November 14.
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