Cisco (CSCO) is set to report second quarter fiscal 2017 earnings results after the closing bell today. With fiscal 2016 revenues climbing less than 1%, the San Francisco-based networking giant has a lot to prove in 2017. But you’ll be hard-pressed to find a more stable large-cap company, which still has a virtually monopoly when it comes to hardware/software that powers the internet.
CSCO stock closed Tuesday at $32.31, netting yet another 52-week high. The shares have risen about 7% year to date and almost 30% over the past year. This afternoon, analysts will be eager to see the extent to which Cisco’s big bets on software have paid off, particularly on the heels of its multibillion-dollar software acquisition of AppDynamics for which Cisco paid roughly twice what AppDynamics was to get in its own public offering.
For the quarter that ended January, Cisco is expected to earn 56 cents per share on revenue of $11.55 billion, according to Thomson Reuters. This compares to the year-ago quarter when the company earned 57 cents per share on $11.93 billion in revenue.
Cisco, which in November reported first-quarter earnings results that beat Wall Street estimates on both the top and bottom lines, has focused on higher-margin businesses such as the Internet of Things and the cloud is working to reverse the recent slide in revenue. Software initiatives that focus on enhancing its capabilities in visualization and security will also be a focus of analysts this afternoon.
From an investment perspective, Cisco offers many qualities that should appeal to value seekers.
Despite the solid year-to-date performance, CSCO stock is priced at just 13.8 times forward earnings, which is some six points below the S&P 500 Index. Assuming the stock was priced on par with the rest of the market the stock would trade today at around $45, or 40% above current levels.
Combined with Cisco's strong dividend yield of 3.30%, which is more than one full percentage point above the rest of the market, there are tons of reasons to be bullish on Cisco for the next 12 to 18 months. Assuming a beat on raise this afternoon, CSCO stock, which has a consensus Buy rating, should reach $40 by the end of 2017, delivering 25% returns.