Stock Picks: Cisco, Visa, Broadcom

Cisco Systems (CSCO)

Oppenheimer reiterates outperform

Cisco Systems Inc., the world's biggest maker of networking equipment, reported quarterly earnings on Feb. 3 that topped analysts' estimates and predicted an acceleration in sales growth as customers resumed projects they put off during the recession. Second-quarter net income rose 23% to $1.85 billion, or 32 cents a share, from $1.5 billion, or 26 cents, a year earlier. Sales climbed 8% to $9.82 billion in the period, which ended Jan. 23.

Cisco expects third-quarter sales to rise 23% to 26% from a year earlier. That equates to revenue of at least $10 billion, topping the average analyst estimate of $9.49 billion.

Oppenheimer analyst Ittai Kidron reiterated an outperform rating on Cisco shares on Feb. 4. The analyst said in a note that the company delivered stronger than expected second-quarter results, with year-over-year sales growth for the first time in four quarters.

Kidron noted that Cisco benefited from strong demand across nearly all regions and segments, with product orders up 11% year-over-year. The analyst said Cisco has refocused on driving growth, noting its plans to hire 2,000-3,000 employees to support its strategic initiatives.

"We're encouraged by Cisco's ability to swiftly right the ship and expect it to capitalize on its momentum," wrote Kidron.

Visa Inc. (V)

Raymond James upgrades to strong buy from outperform; raises estimates, price target

Visa Inc., the world's biggest payments network, posted a 33% gain in fiscal first-quarter profit after the close of trading Feb. 3 as consumers used credit and debit cards instead of cash and spending picked up. Net income for the three months ended Dec. 31 advanced to $763 million, or $1.02 a share, from $574 million, or 74 cents, a year earlier.

On Feb. 4, Raymond James analyst Wayne Johnson upgraded his rating on Visa shares to strong buy from outperform. He said in a note that Visa posted "surprisingly strong" transaction volume results, particularly in debit cards.

"Revenues are growing faster and sooner than expected and cost controls are better than modeled," he wrote. Johnson noted that the company reiterated guidance for EPS growth of over 20% in 2010 and 20% in 2011.

The analyst raised his 2010 estimates for revenue by $210 million to $7,878 million (up 14% year-over-year) and EPS by 32 cents to $3.74 (up 20%). He hiked his 2011 estimates for revenue by $400 million to $8.8 billion (up 11%) and EPS by 58 cents to $4.51 (up 21%).

Johnson also raised his 12-month price target on the shares to $112 from $85.

Broadcom Corp. (BRCM)

Caris & Co. keeps buy

Broadcom Corp., the maker of semiconductors for wireless headsets and television set-top boxes, posted a fourth-quarter profit of $59.2 million, or 11 cents a share, on Feb. 3, compared with a loss a year earlier. Revenue rose 19% to $1.34 billion. The company said first-quarter sales will be little changed to up 5% from the fourth quarter's $1.34 billion, compared with the $1.24 billion average of estimates compiled by Bloomberg.

Caris analyst Craig Ellis kept a buy rating on Broadcom shares on Feb. 4, noting that the company's solid results and outlook provided strong evidence that expectations for the 2010 product cycle and margin leverage are "firmly on track".

The company's decision to initiate a dividend of 8 cents per share was "shareholder-friendly," said the analyst in a note. Based on the company's better-than-expected start to the year, the analyst raised his 2010 EPS estimate to $2.10 from $1.80, but lowered his 2011 to $2.01 from $2.28. Ellis has a $37 price target on the shares.

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