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The Zacks Analyst Blog Highlights: Cisco Systems, Nike, Iconix Brand Group, PVH and Brown Shoe Co.



 The Zacks Analyst Blog Highlights: Cisco Systems, Nike, Iconix Brand Group,
                            PVH and Brown Shoe Co.

PR Newswire

CHICAGO, Dec. 18, 2012

CHICAGO, Dec. 18, 2012 /PRNewswire/ -- 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 Systems Inc. (Nasdaq:CSCO),
Nike Inc. (NYSE:NKE), Iconix Brand Group Inc. (Nasdaq:ICON), PVH Corporation
(NYSE:PVH) and Brown Shoe Company Inc. (NYSE:BWS).

(Logo: http://photos.prnewswire.com/prnh/20101027/ZIRLOGO)

Get the most recent insight from Zacks Equity Research with the free Profit
from the Pros newsletter: http://at.zacks.com/?id=5513

Here are highlights from Monday's Analyst Blog:

Cisco to Sell Linksys

Reportedly, Cisco Systems Inc. (Nasdaq:CSCO) will be selling its Linksys
wireless router unit. According to media reports, the company has hired
Barclays (BCS) to help it sell the home wireless-router company.

This is yet another step by Cisco to exit its consumer-focused business, while
strengthening its presence in corporate software and technology services.

In 2003, Cisco acquired Linksys for approximately $500 million in order to
make an entry into the consumer networking market. However, strong competition
has negatively affected the margins in this business, with a corresponding
negative impact on the company's profits. Now, nearly 10 years later, it looks
like Cisco is trying to get out of this market.

The current deal clearly reflects Cisco's strategy of downsizing its consumer
business in order to save cost and expand in certain strategic areas,
including cloud computing, which is viewed by many technology firms as a key
area for future growth.

Over the past year, the company has closed several of its consumer businesses,
such as the Flip video-camera unit, and reduced about 14% of its global
workforce, or around 11,500 employees.

As a part of its cloud and networking expansion strategy, Cisco has made three
acquisitions in November. The company has acquired Cariden, Meraki and Cloupia
for $141 million, $1.2 billion and $125 million, respectively, in line with
its growth strategy.

Earnings Preview: Nike

Nike Inc. (NYSE:NKE), a global leader in sports equipment and apparel, is
expected to report its financial results for the second quarter of fiscal 2013
after the market closes on Thursday, December 20, 2012. The Zacks Consensus
Estimate for the quarter is $1.00 per share, flat compared to earnings in the
prior-year quarter.

 

Currently, the Zacks Consensus Estimate ranges between 97 cents – $1.04 a
share. For the quarter under review, revenue is expected to be $6,019 million,
according to the Zacks Consensus Estimate.

With respect to earnings surprises, Nike has topped the estimate in three of
the trailing four quarters in the range of negative 14.6% to positive 13.4%.
The average surprise over the last four quarters remained positive at 1.3%.

First Quarter Fiscal 2013 - A Synopsis

Nike Inc. reported first-quarter 2013 earnings of $1.27 per share, which ran
past the Zacks Consensus Estimate of $1.12. However, the quarterly earnings
dipped 9% year over year resulting from poor gross margin, higher SG&A and
increased tax rate.

Nike's total revenue augmented 10% to $6,669 million driven by superior demand
for Nike brand. Adjusting for currency effect, the company's revenue grew 15%.
Revenue for the quarter also surpassed the Zacks Consensus Estimate of $6,438
million.

On currency neutral basis, revenue for Nike brands elevated 16%, while other
businesses delivered 9% growth. Revenue from Cole Haan and Umbro, which are to
be divested, was up 6%. During the quarter, the company witnessed strength
across all key categories and geographies, except Japan.

Earnings Estimate Revisions

Agreement

We do not see any major estimate revisions at this point for the second
quarter of fiscal 2013. Of the 15 estimates, only one second quarter estimate
was revised upward, while none moved in the opposite direction in the last 30
days. In the last 7 days, no movement in estimates was noticed in either
direction for the quarter.

Magnitude

The magnitude of estimate revisions for Nike depicts a slightly optimistic
view for the upcoming quarter. Over the last 7 days, estimates for the
upcoming quarter remained unchanged, while it rose by a penny to $1.00 per
share in the last 30 days.

Conclusion

Recently, Nike successfully completed its previously announced sale of Umbro
toIconix Brand Group Inc. (Nasdaq:ICON) for $225 million. Further, the company
is in the process to dispose its Cole Haan affiliate brand to Apax Partners.
The company expects to close this deal by early 2013.

We believe the divestiture of these brands will help boost the company's
bottom lines. Meanwhile, in an attempt to expand its global reach and market
share, Nike is capitalizing on growth opportunities in emerging markets,
especially China.

Additionally, Nike remains focused on other tools, such as a
direct-to-consumer business model, to expand geographically. We believe that
Nike's continued investment in China and focus on the direct-to-consumer
business will not only help in expanding market share, but will also help
strengthen its competitive position.

However, we prefer to remain on the sidelines given sluggish discretionary
spending, increase in operating costs, and the ongoing European crisis. Nike
faces intense competition in both domestic and international markets from
local as well as established players, such as Adidas AG (including Reebok),
PVH Corporation (NYSE:PVH) and Brown Shoe Company Inc. (NYSE:BWS).

We retain a long-term Neutral recommendation on Nike. The company currently
has a Zacks #2 Rank, which translates into a short-term Buy rating.

 

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