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Cisco Systems (CSCO) Gains But Lags Market: What You Should Know

Zacks Equity Research
·3 mins read

Cisco Systems (CSCO) closed at $40.36 in the latest trading session, marking a +1.28% move from the prior day. The stock lagged the S&P 500's daily gain of 1.64%. Elsewhere, the Dow gained 0.88%, while the tech-heavy Nasdaq added 2.56%.

Prior to today's trading, shares of the seller of routers, switches, software and services had gained 0.71% over the past month. This has lagged the Computer and Technology sector's gain of 3.41% and the S&P 500's gain of 2.44% in that time.

Wall Street will be looking for positivity from CSCO as it approaches its next earnings report date. In that report, analysts expect CSCO to post earnings of $0.71 per share. This would mark a year-over-year decline of 15.48%. Meanwhile, the Zacks Consensus Estimate for revenue is projecting net sales of $11.88 billion, down 9.74% from the year-ago period.

Looking at the full year, our Zacks Consensus Estimates suggest analysts are expecting earnings of $3.11 per share and revenue of $48.25 billion. These totals would mark changes of -3.12% and -2.14%, respectively, from last year.

Investors should also note any recent changes to analyst estimates for CSCO. Recent revisions tend to reflect the latest near-term business trends. As such, positive estimate revisions reflect analyst optimism about the company's business and profitability.

Research indicates that these estimate revisions are directly correlated with near-term share price momentum. We developed the Zacks Rank to capitalize on this phenomenon. Our system takes these estimate changes into account and delivers a clear, actionable rating model.

The Zacks Rank system, which ranges from #1 (Strong Buy) to #5 (Strong Sell), has an impressive outside-audited track record of outperformance, with #1 stocks generating an average annual return of +25% since 1988. Over the past month, the Zacks Consensus EPS estimate remained stagnant. CSCO is currently a Zacks Rank #3 (Hold).

Valuation is also important, so investors should note that CSCO has a Forward P/E ratio of 12.82 right now. For comparison, its industry has an average Forward P/E of 16.93, which means CSCO is trading at a discount to the group.

Investors should also note that CSCO has a PEG ratio of 1.92 right now. The PEG ratio is similar to the widely-used P/E ratio, but this metric also takes the company's expected earnings growth rate into account. Computer - Networking stocks are, on average, holding a PEG ratio of 2.45 based on yesterday's closing prices.

The Computer - Networking industry is part of the Computer and Technology sector. This group has a Zacks Industry Rank of 179, putting it in the bottom 30% of all 250+ industries.

The Zacks Industry Rank gauges the strength of our industry groups by measuring the average Zacks Rank of the individual stocks within the groups. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.

You can find more information on all of these metrics, and much more, on Zacks.com.


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Zacks Investment Research