Shares of Cisco Systems (CSCO) moved higher on Thursday after the company reported quarterly results that beat estimates. Following the positive quarter, several analysts raised their price targets on the stock, with at least one analyst reiterating Cisco as a top pick.
EARNINGS AND GUIDANCE: On Wednesday after the market close, Cisco reported second quarter earnings per share of 73c on revenue of $12.45B, surpassing analysts' consensus estimates of 72c and $12.41B, respectively. Cisco's largest business segment, which includes data center switches and routers, came in at $7.13B, while applications revenue, which includes AppDynamics and WebEx, was $1.47B. Security revenue was $658M. In a statement, Cisco Chairman and Chief Executive Officer Chuck Robbins commented that he is "very pleased" with the Q2 performance, adding that Cisco is "redefining and connecting every domain of the networking infrastructure to deliver the agility, operational efficiency and security our customers require to embrace multicloud, edge computing and digital transformation."
Cisco said it expects adjusted EPS for the third quarter of 76c-78c and revenue to increase 4%-6%. Analysts currently expect EPS of 76c and revenue of $12.84B.
REPURCHASE, DIVIDEND INCREASE: Cisco also said its board approved a $15B increase in the company stock buyback program, bringing the total amount available for repurchases to $24B. Cisco also raised its quarterly dividend by 6% to 35c per share. "Our increased dividend and share repurchase authorization show confidence in the strength of our ongoing cash flows and reinforce our commitment to returning capital to our shareholders," said Chief Financial Officer Kelly Kramer.
ANALYST COMMENTARY: Following Cisco's Q2 report, Citi analyst Jim Suva boosted his price target to $56, saying that the company has transitioned to a higher profitable model with strong cash flows and returning cash to shareholders all evidenced by this quarter's better than expected results and outlook. Jefferies analyst George Notter raised his price target for Cisco Systems to $55 saying the company is "clicking on all cylinders." The analyst said he continues to like Cisco's risk/reward as he believes "there's an improving argument for valuations to continue to re-rate higher." Wells Fargo analyst Aaron Rakers raised his price target for Cisco to $57 given increased estimates and a belief that the company's execution and business model attributes warrant a sustainable multiple expansion. MKM Partners analyst Michael Genovese raised his price target to $54 and noted that the company's public sector orders were surprisingly "very strong" given the U.S. government shutdown in parts of December and January, even though its enterprise order growth decelerated to 11% from 15%.
Meanwhile, Piper Jaffray analyst James Fish raised his price target to $52 and said the results exceeded expectations around all metrics. Fish said that he believes shares can continue to "grind higher," he is becoming "increasingly concerned" around tougher compares, higher expectations, and on-premise infrastructure spending.
JPMorgan analyst Samik Chatterjee reiterated Cisco Systems as a top pick following the quarterly results, and raised his price target to $60. The analyst said the Q2 results and outlook can be broadly characterized as modestly better than expected, although what makes it stand out is the resilience of the performance despite consistent concerns relative to macro growth.
PRICE ACTION: Shares of Cisco are off earlier highs, but are still up 3.6% to $49.20.
Cisco
+1.81 (+3.81%)