Top Tech Doing the Right Things
08/22/2012 8:30 am EST
Some dominant tech stocks are still shaking off the heady days of the late 20th century, when triple digit P/Es were a sign of strength, not absurd valuations, but this one is getting through these sluggish times well, writes Paul McWilliams of Next Inning Technology Research.
Cisco Systems (CSCO) reported earnings a couple cents above the consensus, resulting in fiscal 2012 (ended July 2012) full-year non-GAAP earnings of $1.85; I had forecasted a one- to two-cent beat over the $1.83 consensus.
I think given CSCO's guidance, we'll see analysts increase fiscal year 2013 estimates from the current $1.91 to something closer to my previous $1.98 forecast—which I now think will prove to be at least a nickel too low (I'm upping my forecast to $2.03).
CSCO's report was very well aligned with expectations. While Europe remains weak and shows no signs that it will post a near-term recovery, and spending by the US Federal government isn't much better, other areas continue to spend.
When also given the fact that CSCO guided for year-over-year pro forma growth of about 3%, versus its competitors that forecasted lower year-over-year sales for calendar Q3, I think the evidence suggests CSCO is in fact taking market share.
An upside to my thinking is the fact CSCO stated it will boost its dividend from 8 cents per quarter to 14 cents. This pushes CSCO's dividend to roughly 3% at its current price, and is very welcome news.
CSCO is one of my favorite dividend-paying companies, and its commitment to use roughly 50% of its free cash flow (FCF) to pay dividends and buy back its stock on the open market is good news.
Related Articles on STOCKS
After weeks of sifting through hundreds of cybersecurity stocks on the market, I finally narrowed my...
Stefanie Kammerman, the Stock Whisperer, to tell you the Whisper of the Week: Facebook and ExxonMobi...
Join Ken Calhoun each week for a new episode of Breakout Chart of the Week for stock swing traders a...