Analyst Note| Mark Cash |
Narrow-moat Cisco Systems performed well in the second quarter in our view, with revenue of $12 billion remaining flat year-over-year and adjusted earnings of $0.79 increasing by $0.02 annually. Total product orders increased by 1% year over year after posting five sequential quarters of contractions, and all major product segments saw improved annual growth rates. We believe that Cisco is navigating the pandemic well by finding pockets of strength while efficiently managing costs. Cisco sees encouraging signs of recovery across its customer verticals and expects to return to growth in the third fiscal quarter. We view Cisco’s quarterly dividend increasing by $0.01 to $0.37 in April as a sign of balance sheet and cash flow confidence. Cisco is aptly positioned as organizations upgrade their IT infrastructures and will prudently exhibit cost controls for a resilient operating profile, in our view. We are maintaining our $48 fair value estimate and see shares as fairly valued.