The Zacks Analyst Blog Highlights: Cisco, Axalta Coating, Ennis, Integer and Pilgrim's Pride

For Immediate Release

Chicago, IL –August 19, 2019 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Cisco CSCO, Axalta Coating Systems Ltd. AXTA, Ennis, Inc. EBF, Integer Holdings Corp. ITGR, Pilgrim's Pride Corp. PPC.

Here are highlights from Friday’s Analyst Blog:

Cisco Outlook Takes Trade War Hit

Cisco reported revenue and earnings that barely exceeded the Zacks Consensus Estimates by 1.3% and 0.4%, respectively. But investors are generally more concerned about orders because they are indicative of future performance. That’s where Cisco under-delivered.

A quick look at the earnings call slides clearly shows that the softness is attributable to the APJC (Asia/Pac basically) segment with service provider and enterprise customers being the major pressure.

Service provider issues are nothing new. These customers are cash constrained. From a geographic viewpoint, however, it’s clear that APJC played spoil-sport, with difficult comps in India and continued weakness in China. Segment orders were down 21%.

The 2% decline in enterprise orders was the other negative, with the commentary around it being more disturbing. It appears that the Chinese government isn’t inviting bids from Cisco any longer and management says it’s related to the trade war. Chinese actions accounted for a point, or half of the decline in enterprise orders.

But that isn’t true of the technology sector as a whole. The sector has huge (and growing) exposure to China by virtue of its being the place where the largest chunk of the world’s population is located and because it’s still in the “developing” country category. To get unceremoniously kicked out of that growth just can’t be good or desirable.

Don’t Bet Against Cisco Though

China thankfully accounts for just 3% of its business and Asia/Pac generates lower margins for the company. So the geographic mix was positive for the gross margin last quarter. The continued mix shift favoring software was also positive.

Second, the transition to a subscription model is largely complete, with 70% of all software revenue now coming through it. The company is including software (and security) in a growing number of services, which is helping subscription revenue. The recurring revenue model lends stability to a business that was earlier harnessed to high-end hardware.

As far as product categories are concerned, infrastructure of course remains the largest segment by far, with switching strength at on-premise and data center customers and routing hurt by service provider weakness. The applications business was up double-digits across segments.

And finally, the stock has taken enough of a beating of late, so its valuation currently looks attractive, both with respect to the S&P 500 and the technology sector. Moreover, it’s also trading close to its 52-week low.

Recommendations

Cisco shares carry a Zacks Rank #3 (Hold). Better picks include Axalta Coating Systems Ltd., Ennis, Inc., Integer Holdings Corp., Pilgrim's Pride Corp., since they have a Zacks Rank #1 (Strong Buy). Or, see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.

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Cisco Systems, Inc. (CSCO) : Free Stock Analysis Report
 
Axalta Coating Systems Ltd. (AXTA) : Free Stock Analysis Report
 
Pilgrim's Pride Corporation (PPC) : Free Stock Analysis Report
 
Integer Holdings Corporation (ITGR) : Free Stock Analysis Report
 
Ennis, Inc. (EBF) : Free Stock Analysis Report
 
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