The Zacks Analyst Blog Highlights: Cisco Systems, Equinix, Catalyst Health Solutions, AT&T and Verizon

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Nov 10, 2011, 09:30 ET

Chicago, Nov. 10, 2011 /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 (Nasdaq: CSCO), Equinix Inc. (Nasdaq: EQIX), Catalyst Health Solutions, Inc. (Nasdaq: CHSI), AT&T Inc. (NYSE: T) and Verizon Inc. (NYSE: VZ).

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Here are highlights from Wednesday's Analyst Blog:

Cisco Turnaround On Track

Beleaguered tech giant Cisco Systems (Nasdaq: CSCO) continues its turnaround story after the bell Wednesday, posting its fifth consecutive positive earnings surprise in its first quarter 2012 (October) quarter. Cisco reported an adjusted (for amortization, impairment and restructuring) EPS of 38 cents, which topped the Zacks Consensus Estimate of 34 cents per share.

The company also provided a revenue beat for the quarter: $11.3 billion in sales (GAAP), up from the $11 billion expected in the Zacks Consensus Estimate. This marks the fifth quarter in a row of rising revenues, as well.

So perhaps long-time CEO John Chambers has righted the ship -- er, aircraft carrier -- after all. Between laying off 9% of its workforce and conducting a well-timed stock buyback of 100 million shares at $15 and change (the stock ended the regular trading day at $17.61, and today was particularly bloody with the Nasdaq falling 3.9%) earlier this year, calls for Chambers to resign should continue to dwindle with today's solid beat.

The company posted $2.3 billion from cash flow operations in the quarter, which is another notable positive. During the earnings call, investors will be interested to hear if there has been any improvement in Cisco's routing and switchers or government businesses.

Typically, analysts had been dormant ahead of earnings -- they tend to be in wait-and-see mode ahead of Cisco's quarterlies, upon which lots of volatility is also typical in the aftermath. A 2.2% bump following the earnings report is sending CSCO shares back up to $18 per share in the after-market. That's still down from the $22 range the stock was trading in last winter, but not too shabby.

No one should expect Cisco to be able to turn everything around overnight, especially in such a sluggish market. But considering what was expected -- and how bad some people thought it might get -- for the tech leader, things are looking pretty decent for Chambers and company at the moment.

Equinix Wins Rackspace Deal

Global data center solution and service provider Equinix Inc. (Nasdaq: EQIX) recently announced that it has been selected by Rackspace Cloud to provide data center solutions. Equinix would be mainly responsible for customer-building and deploying private and hybrid clouds.

Enterprise customers now have the option of deploying Rackspace Cloud's Private Edition in International Business Exchange (IBX) data centers located across the world. Equinix's user-friendly platform is expected to provide customers the global reach, scalability, security, high availability, and better connectivity necessary for cloud application performance.

Equinix's recent association with Rackspace is expected to help the later in efficiently managing its cloud infrastructure and will also help the company in efficiently enhancing its cloud based solutions. So it is evident that Equinix is slowly but surely building a position for itself in the cloud computing domain.

This apart, the company recently won a couple of deals. Firstly, TeliaSonera International Carrier, a global provider of cross-border IP and managed services, has selected Equinix to expand its offerings globally through 25 of Equinix's IBX data centers in North America, Europe and the Asia-Pacific.

Secondly, the company secured a deal from Catalyst Health Solutions, Inc. (Nasdaq: CHSI), a pharmacy benefit management services company in the U.S. The company has entered into a technical collaboration with Equinix to host critical business functions, including claims processing and data warehousing.

Equinix's geographical diversity and preferred data destination among major players have resulted in high network density with a vertically focused approach, which will continue to support demand. Moreover, the combination of Switch & Data facilities will provide additional capacity in some markets & enhance pricing over time.

On the other hand, the oversupply of data centers has resulted in significant pricing pressures, while technological advancements that obviate the need for additional data center space, may act as a dampener for the company.

Equinix delivered mixed third quarter results with the bottom line missing our expectation despite the fact that revenue improved on a year-over-year basis. We believe further growth in the client base and strategic acquisitions will enhance the company's revenue potential and expand its geographic reach.

Moreover, we are encouraged by Equinix's effort to expand the current facilities and maintain its fiscal discipline. We are also positive about its recurring revenue model. Despite all the positives, competitive threat from the likes of AT&T Inc. (NYSE: T) and Verizon Inc. (NYSE: VZ) raise our apprehension. European exposure and industry consolidation are also causes for concern.

Equinix holds a Zacks #3 Rank, implying a short-term Hold rating.

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