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Investing.com - Stocks surged for a third-straight day on optimism about a U.S.- China trade deal and fewer worries about a recession hitting any time soon.
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US companies are watering down their spending plans as the threat of slowing global growth and the trade war sap business confidence. Capital expenditure, or capex, is set to grow 3.5 per cent this year, a sharp drop from the 4.2 per cent anticipated just four months ago, according to Citi analysts. “Capex has been one of the biggest concerns about the state of the economy,” said Max Gokhman, head of asset allocation for Pacific Life Fund Advisors.
(Bloomberg) -- Cisco Systems Inc. plummeted the most in almost six years after the company gave a lackluster sales forecast, indicating the U.S.-China trade dispute and a slowing global economy are leading customers to delay updates of their computer networks.Chief Executive Officer Chuck Robbins is trying to turn Cisco into more of a software and services company, but the transformation is being stymied by the trade war and its impact on corporate spending. The company still gets the majority of sales from machines that are the backbone of the internet, making it an economic bellwether. The CEO said some customers are showing more caution because of escalating trade tensions.“They’re just hedging their bets relative to some resolution on this stuff,” Robbins said. “We did see in July some slight early indications of some macro shifts that we didn’t see in the prior quarter.” Robbins said Wednesday.Cisco shares declined 8.6% to $46.25 at the close in New York, the biggest single-day fall since November 2013. It was the worst performer Thursday on the Dow Jones Industrial Average. Even with Thursday’s drop, the stock has gained 6.7% this year.Cisco said sales in the fiscal first quarter will be flat to an increase of as much as 2% from the period a year earlier. That implies revenue of as little as $12.9 billion, compared with analysts’ average estimate of $13.4 billion. Adjusted profit will be 80 cents to 82 cents a share, the San Jose, California-based company said Wednesday in a statement.In the fourth quarter, which ended July 27, total orders were unchanged. Emerging markets bookings were down and the Asia Pacific region saw a decline of 8%, Chief Financial Officer Kelly Kramer said on a conference call with analysts.While Cisco gets less than 3% of revenue from China, business there has dropped “dramatically,” Robbins said. State-owned enterprises and some Chinese telecom providers that had used small amounts of Cisco machinery are not interested in bids from the company amid the current trade tension, he explained.Fiscal fourth-quarter net income fell to $2.2 billion, or 51 cents a share, from $3.8 billion, or 81 cents, a year earlier. Revenue was $13.4 billion, a seventh quarterly expansion. Excluding certain items, Cisco posted profit of 83 cents a share, compared with the average analyst estimate of 82 cents, according to data compiled by Bloomberg.Orders in the Americas and Europe increased, albeit slowly. Bookings from service providers, such as telecom and cable-TV operators, slumped 21%, while government and commercial customers sought more gear than they had a year earlier, Cisco said.Cable companies aren’t buying new equipment -- instead, they’re trying to wring as much life as they can out of their existing gear, Robbins said in an interview. The phone-service providers are spending on consumer 5G, or fifth generation, networks. These customers will shift investment to Cisco’s gear, which lives in their data centers, when they’re deploying business services on those new networks that require greater traffic management, he said.Robbins said he sees little need for concern that the overall economy is about to drop.“There’s a lot of geopolitical dynamics, and I’ve said multiple times that I’ve been shocked how well the macro has held up,” he said. “In most of the world it wasn’t terrible at all. I would not make it a broad-based assertion yet.”In the recent period, Cisco’s hardware business generated sales of $7.88 billion, a gain of 6%. Applications, its software unit, was up 11% at $1.49 billion and security revenue jumped 14% to $714 million.Cisco is the biggest maker of routers, switches and other gear used to connect computers. The company gets a tiny percentage of sales from China, where it’s been largely locked out of the market. Almost 60% of revenue comes from the Americas region.Under Robbins, Cisco has made a string of acquisitions to build a software and services business. Earlier this month, it announced plans to buy closely held Voicea, a maker of software that provides real-time transcription and voice search capabilities.Cisco is still buying hardware companies, too. In July, it agreed to acquire Acacia Communications Inc. for about $2.6 billion, gaining chips and machines that help translate optical signals into electronic data.(Updates with share price in the fourth paragraph.)To contact the reporter on this story: Ian King in San Francisco at email@example.comTo contact the editors responsible for this story: Jillian Ward at firstname.lastname@example.org, Alistair Barr, Andrew PollackFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
Cisco (CSCO) stock fell 8% today after releasing its Q4 results after the market closed yesterday. Cisco reported sales of $13.4 billion, a rise of 6% YoY.
(Bloomberg) -- Cisco Systems Inc. shares sank on Thursday, after the company gave a first-quarter outlook that was below expectations, pressured by macroeconomic headwinds, including the U.S.-China trade war.The Chinese market was seen as a major factor behind weakness in service-provider orders, and Morgan Stanley wrote that “outsized” macro headwinds “were too much to provide much opportunity for upside.” The firm was one of at least six to trim its price target on the stock.Shares fell as much as 8% in its biggest one-day percentage loss since May 2017. Closing with a decline of that magnitude would represent Cisco’s worst session since November 2013, according to historical data compiled by Bloomberg. At current levels, Cisco is trading at its lowest level since February, and it has dropped more than 18% from a peak in July.Here’s what analysts are saying about the results:Morgan Stanley, James Faucette“The outsized headwinds” in service-provider orders, along with weakness in China and other emerging markets, “were too much to provide much opportunity for upside” to the quarter.The current valuation is “appropriate.” While the macroeconomic environment is worsening, Cisco’s cash flow gives it flexibility to make acquisitions or return cash to shareholders.Equal-weight rating, price target trimmed to $49 from $51.Jefferies, George NotterInvestors are likely “over-estimating the size of the negative top line growth inflection.”“Cisco has traditionally been very conservative when they’ve reduced expectations,” and historically, “upsets relative to consensus have been followed by several quarters of outperformance.”The outlook “likely contains a healthy dose of conservativism,” but there isn’t much “octane” in the stock right now.Buy rating, price target lowered to $54 from $62.JMP Securities, Erik Suppiger“Orders were flat Y/Y, the worst performance in two years.”About 70% of the company’s software revenue was generated from subscriptions, “suggesting that the company is executing on its strategy of becoming a provider of software and services.”Market-perform rating.Piper Jaffray, James FishThe results were “fine overall,” although the softness should extend into the first quarter.“Cisco is executing better than other vendors in this current macro-downturn,” and Piper is “cautiously optimistic Cisco can manage the macro.”The post-earnings sell-off looks “slightly overdone.”Overweight rating, target trimmed to $55 from $58.UBS, John RoyThe company’s fundamentals are strong despite the weak first-quarter outlook.Buy rating, price target lowered to $58 from $61.What Bloomberg Intelligence Says:“The company’s global IT exposure can’t dodge weakening macroeconomics, despite solidly carrying out its business-model transformation toward a healthier mix of software and recurring sales.”\-- Analyst Woo Jin Ho\-- Click here for the research(Updates stock and chart to market open)To contact the reporter on this story: Ryan Vlastelica in New York at email@example.comTo contact the editors responsible for this story: Catherine Larkin at firstname.lastname@example.org, Steven Fromm, Courtney DentchFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
The resilience of corporate spending on IT equipment in the face of geopolitical and economic uncertainty has started to crack, to judge by a sudden downdraft in orders at Cisco Systems. After dropping 4 per cent in normal trading, Cisco’s stock tumbled another 7 per cent in after-market trading to $46.66. Falling demand in the UK, Cisco’s second-biggest market after the US, was the single biggest factor in declining orders from big corporate customers, Chuck Robbins, chief executive, said in an interview with the Financial Times.
GW Pharmaceuticals, NetApp, KB Home, PulteGroup, M/I Homes, Lennar and Toll Brothers highlighted as Zacks Bull and Bear of the Day
Investing.com -- U.S. stock markets swung sharply at the opening on Thursday after weaker-than-expected industrial data poured cold water on a market that had appeared ready to rebound on signs that the U.S. consumer is still in good health.
Cisco (CSCO) is benefiting from its expanding footprint in the rapidly growing security market. Further, partnerships and accretive acquisitions will boost its revenue base.