Why Cisco Shares Surged
May 16th 2013 2:53PM
Updated May 16th 2013 4:05PM
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of network equipment king Cisco Systems soared 12% today after its quarterly results and outlook topped Wall Street expectations.
So what: Sluggish global business spending has weighed on the technology sector recently, but Cisco's first-quarter results -- adjusted EPS of $0.51 on revenue of $12.2 billion versus the consensus of $0.49 and $12.2 billion -- suggest that its competitive position is strengthening amid the weak environment. In fact, the company's gross margin widened 110 basis points to 63%, reinforcing investor confidence in its market share growth going forward.
Now what: Management now sees adjusted EPS of $0.50-$0.52 and top-line growth of 4%-7%, implying revenue of $12.16 billion to $12.51 billion, versus the consensus of $0.50 and $12.47 billion. "We are starting to see some good signs in the U.S. and other parts of the world which are encouraging," Chairman and CEO John Chambers said. "We have the right products, the right solutions and our customers are coming to us to solve their biggest business problems. The pace of change is increasing and Cisco is well positioned." More important, with the stock still trading at a forward P/E of 11 and sporting a 3%-plus dividend yield, there's still time to buy into that bullishness.
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The article Why Cisco Shares Surged originally appeared on Fool.com.Fool contributor Brian Pacampara has no position in any stocks mentioned. The Motley Fool recommends Cisco Systems. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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