PACIFIC GROWTH UPGRADES CISCO SYSTEMS TO BUY FROM NEUTRAL
Pacific Growth analyst Matthew Robinson says Cisco Systems' (CSCO) fourth quarter EPS of $0.40 was $0.01 above his and Street estimates on moderate revenue upside and lower-than-expected operating expenses.
Robinson says there were no heroics here, but Cisco's order commentary offers better visibility than he had expected; he notes, though, that service provider volumes face tough comparisons and enterprise demand, which in his view is a more profound economic indicator, appears to have gotten significantly firmer. With regard to his upgrade, he also cites prodigious free cash flow of $2.08 per share (annualized) and a reasonable valuation (as of yesterday's close) relative to peers.
He sees $1.63 adjusted fiscal year 2009 (July) EPS on about $43 billion in revenue.
STIFEL CUTS COMPUTER SCIENCES TO HOLD FROM BUY
Stifel analyst George Price says Computer Sciences' (CSC) first quarter was mixed, with revenue ahead of estimates and EPS towards upper end of guidance. But EPS benefitted from much lower-than-expected tax rate, and otherwise would have been below guidance range.
Price notes his rationale for upgrading CSC was based on expectations of meaningful margin expansion, discretionary demand holding up and lessening risk from NHS, all of which seem to have been challenged following its first quarter report. While he doesn't see much downside for CSC, he has lower confidence in his estimates and drivers of potential upside, and thinks that, at this point, the risk/reward is fairly balanced.
He cuts $4.31 fiscal year 2009 (March) EPS view to $4.25 and $4.80 fiscal year 2010 forecast to $4.73.
JPMORGAN CUTS PACER INTERNATIONAL TO UNDERWEIGHT FROM NEUTRAL
JPMorgan analyst Thomas Wadewitz says Pacer International's (PACR) $0.40 third quarter EPS compares with $0.37 consensus. He believes the timing mismatch between fuel surcharge PACR pays is on a one-quarter lag and customer fuel surcharge it receives (2-week lag) was the primary driver of the upside.
He notes against the backdrop of solid volumes at other intermodal providers, PACR reported Stacktrain volumes fell 3% year-over-year and retail fell 10% year-over-year. He says the company appears to be losing traction in the market and appears poorly positioned to participate in the Eastern U.S. Truckload conversion opportunity.
Due to lower fuel and weak volumes, he expects PACR to lose EPS momentum in the second half of the year. He cuts $1.90 2008 EPS estimate to $1.80 and $1.95 2009 to $1.85.