Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Cisco Catches Up to the Market -- That's Just for Starters

Watch stocks you care about

The single, easiest way to keep track of all the stocks that matter...

Your own personalized stock watchlist!

It's a 100% FREE Motley Fool service...

Click Here Now

The rhythm of daily stock market gains is almost becoming monotonous. Today, U.S. stocks recorded their ninth "up" day in 10 sessions (each of which produced a record (nominal) high in the process), as the S&P 500 (SNPINDEX: ^GSPC  ) and the narrower, price-weighted Dow Jones Industrial Average (DJINDICES: ^DJI  ) rose 0.5% and 0.4%, respectively.

Today's gains didn't impress option traders, however, as the VIX Index (VOLATILITYINDICES: ^VIX  ) , Wall Street's fear gauge, rose slightly, to close at 12.81. (The VIX is calculated from S&P 500 option prices and reflects investor expectations for stock market volatility over the coming 30 days.)

Cisco gets some love -- finally
After the market closed on Wednesday, the world's largest networking equipment manufacturer and Dow component
Cisco Systems (NASDAQ: CSCO  ) reported results for its fiscal third quarter ended April 27. Investors liked what they heard and sent the stock up more than 7% in the after-hours session, which was enough to push the shares' year-to-date performance past that of the S&P 500:

CSCO Chart

CSCO data by YCharts.

Let's start with a caveat: The after-hours session attracts few participants and is illiquid -- therefore, prices may not reflect the broad market's reception of the new information the following day. However, a glance at Cisco's fundamentals and its valuation suggest these after-hours gains are easily sustainable; in fact, I think this report could be the catalyst for a further rerating of the shares.

What did investors like about the report? Excluding unusual items (which include stock-based compensation -- a routine practice at technology companies), Cisco earned $0.51 per share in the quarter, two cents over the consensus estimate. Meanwhile, revenues of $12.22 billion were also above analysts' expectations of $12.18 billion.

Considering that Cisco peers Juniper Networks and IBM put up weak numbers recently, Cisco is providing investors with evidence that their shift from "being a communications company, a networking company, to more of an IT company" (in the words of CEO John Chambers) was a smart strategic choice.

With shares sporting a 3.2% dividend yield and trading at less than 10.5 times the estimate of next 12 months' earnings per share (based on the $21.21 regular session closing price), it's hardly absurd to think the after-hours price gains will hold and that the shares will go on to outperform the market by a healthy margin.

Once a high-flying tech darling, Cisco is now on the radar of value-oriented dividend lovers. Get the lowdown on the routing juggernaut in The Motley Fool's premium report. Click here now to get started.

Read/Post Comments (0) | Recommend This Article (5)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2434537, ~/Articles/ArticleHandler.aspx, 9/28/2016 4:38:13 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 7 hours ago Sponsored by:
DOW 18,228.30 133.47 0.74%
S&P 500 2,159.93 13.83 0.64%
NASD 5,305.71 48.22 0.92%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/27/2016 4:45 PM
^DJI $18228.30 Up +133.47 +0.74%
^GSPC $2159.93 Up +13.83 +0.64%
S&P 500 INDEX CAPS Rating: No stars
^VIX $13.10 Down -1.40 -9.66%
Volatility S&P 500 CAPS Rating: No stars
CSCO $31.48 Up +0.41 +1.32%
Cisco Systems CAPS Rating: ****