The remote lifestyle, particularly workforce structures, and dependence on cloud computing have heightened the demand for networking solutions over the past year. Because the pandemic-driven trends are expected to continue even in the post-pandemic world, the demand for networking is not expected to decline anytime soon. Though the economic recovery and concerns about inflation have been driving a rotation by investors away from tech stocks, we think the solid growth prospects of networking companies should help their stocks rebound in the near term.
The growing need for cybersecurity, cloud-computing, automation and analytic solutions, as many businesses continue to adopt hybrid-working models, should be to the benefit of networking service providers. In fact, the global Network-as-a-Service market is expected to grow at a 33.1% CAGR over the next five years to reach $45.03 billion by 2026.
Cisco Systems, Inc. (CSCO)
CSCO designs, manufactures, and sells Internet Protocol (IP) based networking products and services related to the communications and information technology industry worldwide. Its offerings include infrastructure platforms, applications, security and other products.
On May 14, CSCO announced its intent to acquire Kenna Security, Inc., a privately held cybersecurity company in California, to advance CSCO’s commitment to detect cyber threats faster and simplify security Kenna’s risk-based vulnerability management technology. Because individuals and organizations are adopting hybrid working models, the company anticipates healthy sales amid the rising need for cybersecurity.
On May 5, CSCO’s Webex, a leading provider of cloud-based collaboration solutions, announced a new integration with Box, Inc. (BOX), a leading cloud content management platform, which will enable users to access Webex as a Recommended App within Box. This should help businesses work securely in the cloud, and CSCO expects to expand its customer base with the facility in the coming months.
CSCO’s total revenue for its fiscal year 2021 third quarter, ended May 1, increased 6.8% year-over-year to $12.80 billion. Its non-GAAP gross profit was $8.45 billion, up 5.7% from the prior-year period. Its non-GAAP income from operations is reported to be $4.30 billion for the quarter, which represents a 2.8% improvement year-over-year. While its non-GAAP net income increased 4.2% year-over-year to $3.51 billion, its EPS increased 5.1% year-over-year to $0.83.
The $0.82 consensus EPS estimate for the current quarter, ending July 31, represents a 2.5% year-over-year improvement. The stock surpassed consensus EPS estimates in each of the trailing four quarters. The $13.02 billion consensus revenue estimate for the current quarter represents a 7.1% rise from the prior-year period. Analysts expect CSCO’s EPS to grow 5.9% per annum over the next five years. CSCO has climbed 26.6% over the past nine months to close yesterday’s trading session at $53.31.
CSCO’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
The stock has an A grade for Quality, and a B grade for Stability. We have also graded CSCO for Growth, Value, Sentiment and Momentum. Click here to access all CSCO’s ratings.
CSCO is ranked #10 of 54 stocks in the B-rated Technology – Communication/Networking industry.
Motorola Solutions, Inc. (MSI)
MSI is a data communications and telecommunications equipment provider that develops data capture, wireless, infrastructure, bar code scanning, two-way radios, and wireless broadband networks. It also produces public safety and government products, voice and data communications products and systems, and wireless LAN securities.
On May 18, MSI signed a framework agreement with BlueLight Commercial to provide U.K. police forces, highway patrols and border guards with integrated video solutions for their vehicles to improve road safety and the performance of operating units. With the ability to capture evidence from multiple camera perspectives ensuring a 360-degree view, safety-critical communication and analysis solutions, MSI hopes to establish a long-term partnership with U.K. public safety organizations.
France’s Interior Ministry will deploy MSI 30,000 VB400 body cameras in its National Police and Gendarmerie corps under a $17.5 million contract to modernize police performance and ensure safety, from July 2021 onward. With its intuitive recording function and long battery life, MSI will also provide a wide range of accessories, including helmet cameras that capture HD images. MSI is also looking forward to a long-term partnership with France’s Interior Ministry.
For its fiscal year 2021 first quarter, ended April 3, 2021, MSI’s net sales were $1.77 billion, which represented a 7.1% year-over-year improvement. The company’s gross profit increased 9.3% year-over-year to $860 million. Its non-GAAP operating earnings were $411 million for the quarter, up 18.4% from the prior-year period. MSI’s net earnings came in at $244 million, which is a 23.9% year-over-year rise. Its non-GAAP EPS increased 25.5% year-over-year to $1.87.
Analysts expect MSI’s EPS to improve 38.1% year-over-year for the current quarter, ending June 30, to $1.92. It surpassed the Street’s EPS estimates in each of the trailing four quarters. And its $194 billion consensus revenue estimate for the current quarter, represents a 19.7% rise on a year-over-year basis. Analysts expect the stock’s EPS to grow at 7.4% per annum over the next five years. MSI has gained 31.7% over the past year and closed yesterday’s trading session at $203.85.
MSI’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to Buy in our POWR Ratings system.
The stock has a B grade for Growth, Sentiment and Quality also. In addition to the POWR Ratings grades we’ve just highlighted, one can see MSI’s ratings for Stability, Value and Momentum here.
MSI is ranked #4 in the Technology – Communication/Networking industry.
Zebra Technologies Corporation (ZBRA)
ZBRA designs, manufactures and sells automatic identification and data capture products worldwide. They include mobile computers, radio frequency identification devices (RFID), readers and scanners, specialty printers, real-time location systems, related supplies, and application software. It also provides services such as maintenance, technical support, repair, managed and professional services.
On May 20, Aruba, a Hewlett Packard Enterprise Company (HPE), in collaboration with ZBRA, announced the availability of an embedded solution for mobile devices that delivers unmatched real-time visibility into roaming user experiences and application performance. Aruba’s AI-based UXI agents’ network and application testing capabilities work in concert with ZBRA’s Worry-Free Wi-Fi Edge Insights to deliver a device-level view and pre-analyzed insights of the network.
Through the acquisition of Adaptive Vision and Cortexica, on May 18, ZBRA entered the fixed industrial scanning (FIS) and machine vision (MV) markets by introducing a new portfolio of solutions that enable track and trace capabilities and quality inspection of manufacturing, warehouse and logistics processes. Its MV smart cameras and fixed industrial scanners unlocked by Zebra Aurora, a unified software platform, meets businesses’ need for simplicity, speed, productivity and efficiency. ZBRA expects to generate high sales amid the rising need for industrial automation solutions.
For the fiscal year 2021 first quarter, ended April 3, 2021, ZBRA’s non-GAAP net sales came in at $1.35 billion, which represented a 28.3% improvement year-over-year. The company’s non-GAAP gross profit increased 38.9% year-over-year to $660 million. Its non-GAAP net income came in at $258 million, up 77.9% from the prior-year period. And its non-GAAP EPS increased 79.4% year-over-year to $4.79.
Analysts expect ZBRA’s EPS for the current quarter, ending June 30, 2021 to be $4.11, up 70.5% year-over-year. It surpassed the Street’s EPS estimates in each of the trailing four quarters. For the current quarter, analysts expect ZBRA’s revenue to be $1.35 billion, representing a 40.9% rise from the prior-year period. Analysts expect its EPS to grow at 10% per annum over the next five years.
ZBRA has gained 106% over the past year and 82.2% over the past nine months. It closed yesterday’s trading session at $501.92.
It’s no surprise that ZBRA has an overall B rating, which equates to Buy in our POWR Ratings system. The stock has a B grade for Growth, Momentum, Quality and Sentiment. To see additional POWR Ratings for ZBRA’s Stability and Value, click here.
ZBRA is ranked #13 of 86 stocks in the A-rated Industrial – Machinery industry.
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CSCO shares were trading at $53.00 per share on Wednesday afternoon, down $0.31 (-0.58%). Year-to-date, CSCO has gained 20.25%, versus a 12.43% rise in the benchmark S&P 500 index during the same period.
About the Author: Sweta Vijayan
Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market. More...
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