Cisco Systems, Inc. CSCO‘s fiscal third-quarter earnings report and fourth-quarter guidance was alarming enough for investors to send the stock lower by more than 7 percent Thursday.
Here is a summary of what some of Wall Street’s most notable analysts are saying after the report.
Citi: Maintain At Buy
Citi’s Jim Suva maintains a Buy rating on Cisco’s stock with a price target lowered from $37 to $36.
According to Suva, Cisco’s earnings report came in better than expected, but the company’s guidance fell short of expectations. But the analyst remains bullish on the stock as the company’s earnings per share could benefit by around 16 percent to 20 percent under President Donald Trump’s tax reforms.
The analyst also noted that around 3 percent points of Cisco’s sales declines from a year ago is attributed to the company’s shift to a subscription model along with a decline in business from the federal government.
MKM: ‘Modest’ Progress Seen
MKM Partners’ Michael Genovese maintains a Neutral rating on Cisco’s stock with a price target lowered from $35 to $34.
Genovese noted that Cisco’s “solid” third-quarter report is overshadowed by the fact that the company has only shown “modest” progress in its business transition. Specifically, 31 percent of revenue in the quarter came from recurring sources, which does mark an increase from 29 percent in the prior year but still consistent with prior quarters.
Looking forward, Cisco’s stock could re-rate higher as the company’s percentage of recurring revenue increases.
Wunderlich: Tough Environment
Wunderlich’s Matthew Robison maintains a Hold rating on Cisco’s stock with an unchanged $30 price target.
Robison’s unchanged view stems from the fact that the earnings report shows that the legacy tech company is operating in a tougher-than-expected environment but there are some encouraging signs, including a better-than-expected performance in the routing segment.
Robison also believes Cisco’s progress toward building a company that boasts a strong recurring revenue mix will be “gradual” although there are no immediate catalysts to excite shareholders in the near term.
Cowen: Weak Outlook But Still A Buyer
Cowen’s Paul Silverstein maintains an Outperform rating on Cisco’s stock with an unchanged $39 price target.
Silverstein acknowledged the “disappointing” revenue growth seen in the third quarter but also highlighted the company’s margin structure remains “impressive.” Since these two factors cancel each other out, the analyst maintains a bullish stance on Cisco’s stock, which is trading at a “highly favorable” risk to reward profile.
Jefferies: Not As Bad
Jefferies George Notter maintains a Buy rating on Cisco’s stock with an unchanged $37 price target.
While Notter admitted to being “frustrated” with Cisco’s guidance, it is hard to believe the overall IT spending environment is as bad as the guidance assumes it to be.
The analyst also highlighted the fact that Cisco’s operating margins hit 32.3 percent, which marks its best margin result dating back all the way to the July 2004 ending quarter. Looking forward the analyst is confident that the company can at the very least sustain margins, if not improve them further.
The following are the M&A deals, rumors and chatter circulating on Wall Street for Thursday, May 18, 2017.
Energy Transfer Partners Makes Tender Offer To Purchase PennTex Midstream Partners for $20/Unit Cash
The Tender Offer:
Energy Transfer Partners LP ETP announced a tender offer to purchase all of the outstanding common units representing limited partner interests in PennTex Midstream Partners, LP PTXP not currently owned by ETP for $20.00 per common unit in cash. ETP currently owns approximately 32.4 percent of the outstanding PennTex common units. The tender offer will expire on June 19, 2017, unless the offer is extended in accordance with its terms.
There can be no assurance that the tender offer will be completed. The tender offer is subject ETP and its affiliates owning more than 80% of the outstanding PennTex common units following completion of the tender offer.
PennTex Midstream Partners closed at $16.65, and traded at $19.87 after-hours.
Lowe’s to Acquire Maintenance Supply Headquarters for $512M
Lowe’s Companies, Inc. LOW announced it has agreed to acquire the distributor of MRO products to the multifamily housing industry, Maintenance Supply Headquarters, for $512 million. The acquisition is expected to be completed in Lowe’s FY Q2, subject to regulatory approval.
Lowe’s closed at $84.05, up $0.30.
B. Riley Financial to Acquire Wunderlich Securities for $67M
B. Riley Financial Inc RILY has signed a definitive agreement to acquire Wunderlich Securities in a cash and stock deal valued at $67 million. The purchase price consists of $36 million in cash, 1.9 million shares of B. Riley Financial common stock, and warrants to purchase 0.82 million shares of B. Riley common stock.
The transaction is expected to close in June 2017.
B. Riley closed at $14.05, up $0.35.
U.S. stock futures traded higher in early pre-market trade, ahead of earnings from Campbell Soup Company CPB. St. Louis Federal Reserve Bank President James Bullard is set to speak in St. Louis at 9:15 a.m. ET, while San Francisco Federal Reserve Bank President John Williams will speak in San Francisco at 1:40 p.m. ET.
Futures for the Dow Jones Industrial Average climbed 29 points to 20,673.00, while the Standard & Poor’s 500 index futures rose 5.50 points to 2,369.00. Futures for the Nasdaq 100 index gained 13.25 points to 5,643.75.
Oil prices traded higher as Brent crude futures rose 1.18 percent to trade at $53.13 per barrel, while US WTI crude futures gained 1.18 percent to trade at $49.93 a barrel. The Baker Hughes North American rig count report for the latest week is schedule for release at 1:00 p.m. ET.
A Peek Into Global Markets
European markets were higher today, with the Spanish Ibex Index rising 0.70 percent, STOXX Europe 600 Index surging 0.41 percent and German DAX 30 index gaining 0.23 percent. The UK’s FTSE index was trading higher by 0.43 percent, while French CAC 40 Index climbed 0.48 percent.
In Asian markets, Japan’s Nikkei Stock Average rose 0.19 percent, Hong Kong’s Hang Seng Index rose 0.15 percent, China’s Shanghai Composite Index gained 0.02 percent and India’s BSE Sensex rose 0.10 percent.
Analysts at Macquarie downgraded Pandora Media Inc P from Outperform to Neutral.
Pandora shares rose 5.49 percent to close at $9.42 on Thursday.
- Deere & Company DE reported stronger-than-expected earnings for its second quarter.
- Gap Inc GPS reported stronger-than-expected earnings for its first quarter on Thursday.
- Foot Locker, Inc. FL posted weaker-than-expected earnings for its first quarter on Friday.
- Ross Stores, Inc. ROST posted better-than-expected profit for its first quarter.
Some of the stocks that may grab investor focus today are:
- Wall Street expects Foot Locker, Inc. FL to report quarterly earnings at $1.38 per share on revenue of $2.02 billion before the opening bell. Foot Locker shares rose 0.48 percent to $70.79 in after-hours trading.
- Ross Stores, Inc. ROST posted better-than-expected profit for its first quarter. Ross Stores shares surged 4.19 percent to $63.63 in the after-hours trading session.
- salesforce.com, inc. CRM posted upbeat earnings for its first quarter and raised its FY18 outlook. salesforce.com shares rose 1.37 percent to $88.95 in the after-hours trading session.
- Analysts are expecting Campbell Soup Company CPB to have earned $0.64 per share on revenue of $1.87 billion in the latest quarter. Campbell Soup will release earnings before the markets open. Campbell Soup shares declined 0.82 percent to $56.94 in after-hours trading.
- Autodesk, Inc. ADSK reported a narrower-than-expected loss for its first quarter. Autodesk shares jumped 10.08 percent to $105.49 in the after-hours trading session.
- McKesson Corporation MCK reported upbeat profit for its fourth quarter on Thursday. McKesson shares climbed 8.24 percent to $153.10 in the after-hours trading session.
- Analysts expect Deere & Company DE to report quarterly earnings at $1.68 per share on revenue of $7.31 billion before the opening bell. Deere shares gained 1.18 percent to $114.00 in after-hours trading.
- Gap Inc GPS reported stronger-than-expected earnings for its first quarter on Thursday. Gap shares climbed 4.14 percent to $24.15 in the after-hours trading session.
- Not yet a year into his presidency, Brazilian President Michel Temer is facing a major bribery scandal that has sent Brazilian stocks tumbling:
- Twitter Inc (TWTR) shares jumped 2 percent after cofounder Biz Stone announced he is returning to work for the company full-time. Why are investors so optimistic about Stone’s return? Here’s a look at a few ways he could light a fire under Twitter:
- Amazon.com, Inc. (AMZN) has become known as the everything store. That’s why it’s no surprise recent reports have stated the company is interested to get into the pharmacy space: Link
- Corium International (CORI) shares have been white hot over the past 10 days, rising more than 30 percent since the company reported positive preliminary results in the clinical study of its Corplex Donepezil Alzheimer’s Disease (AD) product candidate:
These trades were placed during Thursday’s regular session.
- YRC Worldwide Inc YRCW Jun 8.0 Calls: 9600 @ ASK $0.54: 10k traded vs 64 OI: Earnings 7/27 After Close (est) $8.04 Ref
- Rite Aid Corporation RAD Jan 2019 10.0 Calls: 1000 @ ASK $0.03: 1350 traded vs 61k OI: Earnings 6/22 Before Open (est) $3.46 Ref
- salesforce.com, inc. CRM May 95.0 Calls Sweep: 760 @ ASK $0.22: 3047 traded vs 11k OI: $87.53 Ref
- Humana Inc HUM Jun 245 Calls: 3000 @ ASK $1.40: 3000 traded vs 7895 OI: Earnings 8/2 Before Open (est) $226.61 Ref
- Ambev SA (ADR) ABEV May 5.0 Calls Sweep: 500 @ ASK $0.666: 522 traded vs 20 OI: Earnings 7/27 Before Open (est) $5.53 Ref
- Ascena Retail Group Inc ASNA 30.14% shares dipped 37.8 percent to $1.75 after the company lowered its Q3 and FY17 guidance.
- Endologix, Inc. ELGX 35.96% shares dropped 35 percent to $4.38 after the company issued an update on Nellix System US regulatory status. Following meeting with the FDA, Endologix will seek US approval by conducting a confirmatory clinical study with the IFU and Gen2 device design. Stifel Nicolaus downgraded Endologix from Buy to Hold.
- Stein Mart, Inc. SMRT 37.06% shares tumbled 34.7 percent to $1.11 after the company reported weak Q1 results and suspended its quarterly dividend.
- Gol Linhas Aereas Inteligentes SA (ADR) GOL 26.05% shares declined 23.4 percent to $11.76 on fears that another political scandal will result in the impeachment of President Michel Temer. Temer, who ran on a platform of economic reform, has been in office for less than a year, but a new report by Brazilian newspaper O Globo has accused Temer of paying off a potential witness in an ongoing graft probe.
- Banco Bradesco SA (ADR) BBD 18.73% shares tumbled 18.1 percent to $8.22 session. Stocks of US-listed Brazil-based companies seeing a substantial downside amid bribery allegations related to President Temer.
- Banco Santander Brasil SA (ADR) BSBR 20.48% shares declined 17.8 percent to $7.26.
- Companhia Brasileira de Distribuicao-ADR CBD 15.1% shares dipped 17.4 percent to $19.63.
- Itau Unibanco Holding SA (ADR) ITUB 18.24% shares fell 16.3 percent to $10.50 after dipping 3.28 percent on Wednesday.
- Gafisa SA (ADR) GFA 16.57% shares slipped 16 percent to $7.35.
- Companhia Siderurgica Nacional (ADR) SID 17.3% shares dropped 15.6 percent to $2.00.
- Companhia de Saneamento Basico (ADR) SBS 17.3% shares declined 15.7 percent to $8.48.
- Gerdau SA (ADR) GGB 14.58% shares dipped 15.2 percent to $2.71 after declining 3.19 percent on Wednesday.
- Petroleo Brasileiro SA Petrobras (ADR) PBR 16.57% dropped 14 percent to $8.85 amid bribery allegations related to President Temer.
- Banco Bradesco S.A. BBDO 16.42% shares fell 13.7 percent to $7.98.
- Pure Storage Inc PSTG 13.84% shares plunged 10.5 percent to $10.45. Morgan Stanley downgraded Pure Storage from Overweight to Equal-Weight.
- Teekay Corporation TK 8.06% fell 8.3 percent to $6.66. Teekay reported a Q1 loss of $45.3 million on revenue of $543.5 million.
- Cisco Systems, Inc. CSCO 7.61% shares declined 7.3 percent to $31.35. Cisco reported better-than-expected earnings for its third quarter, but issued a weak revenue forecast for the current quarter. Cisco also announced plans to cut an additional 1,100 jobs.
- ZTO Express (Cayman) Inc (ADR) ZTO 5.84% shares slipped 6 percent to $13.20. ZTO reported Q1 adjusted earnings of $0.10 per share on sales of $379.9 million. The company also named Hongqun Hu as COO.