The Zacks Analyst Blog Highlights:Cisco Systems, IBM, Oracle, Lions Gate Entertainment and PowerShares Dynamic Leisure & Entertainment ETF
CHICAGO, May 15, 2014 /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 the Cisco Systems (Nasdaq:CSCO-Free Report), IBM (NYSE:IBM-Free Report), Oracle (NYSE:ORCL-Free Report), Lions Gate Entertainment (NYSE:LGF-Free Report) andPowerShares Dynamic Leisure & Entertainment ETF (AMEX:PEJ-Free Report).
Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.
Here are highlights from Wednesday's Analyst Blog:
Cisco Beats Earnings, Shares Up Big
Networking giant Cisco Systems (Nasdaq:CSCO-Free Report) reported earnings after the bell Wednesday, and as per normal, beat sales and earnings projections moderately. Revenues of $11.55 billion in Cisco's fiscal Q3 beat the Zacks Consensus Estimate of $11.34 billion, with earnings of 46 cents per share (actual, on a GAAP basis) topping our expectations of 43 cents.
As indicated, there's not much new going on in the results for Cisco these days -- nor has there been in awhile. Today's earnings numbers mark the fifth straight positive earnings surprise for Cisco, albeit in a similar tepid, incremental sort.
Then again, Cisco is so huge and trying to adjust to the modern marketplace on so many levels, they in some ways truly do resemble an aircraft carrier being turned around on the ocean. And with long-time CEO John Chambers keeping the progress slow and steady from the lower-margin "old tech" of switchers and routers to building out into the Intercloud and data center initiatives, that Cisco is indeed making incremental progress and surprising regularly to the upside is helping CSCO shares climb high in the after-market.
That said, most of this building out still has pretty long time horizons: Cisco's role in the "Internet of Everything," largely concerning the company's Intercloud development, along with things like its Visual Networking Index, are projected out four or even 10 years, in some cases. Not that anyone really expects the next generation of IT to amount to a flip of the switch, but certainly things like this have kept Cisco from being considered one of the "sexy" players in tech for awhile now. Then again, much the same can be said for Cisco's main rivals, IBM (NYSE:IBM-Free Report) and Oracle (NYSE:ORCL-Free Report).
But Cisco did pay out a 19-cent per share dividend and bought back 90 million shares in the quarter, folding nicely into investors' recent sentiments about finding solid, secure equities with an income yield. To wit, CSCO shares are up around 8% in the past year, but more than 7 1/2% in after-hours trading.
Buy Lions Gate Ahead of Earnings?
Lions Gate Entertainment (NYSE:LGF-Free Report), the name behind such films as The Expendables, Divergent, and The Hunger Games, is down about 19% this year and roughly flat over the last 365 days. The recent rough patch has come on the heels of an incredible run, with Lions Gate going from a market value of around $787 million in March 2011 to about $5 billion in September 2013. However, since September 10, 2013, Lions Gate has lost about $1.5 billion in market value.
With the studio showing recent signs of decline, why would Lions Gate be a buy? Here are three great reasons:
First, Lions Gate has some very high potential movie deals in the pipeline, including the recently announced deals on a live action Mighty Morphin Power Rangers, New York Times bestseller Hatching Twitter TV series, and the Hunger Games: Mockingjay Parts 1 and 2. Concerns that Lions Gate doesn't have any new high-grossing movies to replace Twilight's revenue appear overblown.
Second, Lions Gate has a history of beating analysts' estimates. In December 2012, Lions Gate beat analysts' estimates by 54%. The following quarter the company only beat analysts' estimated by 16%. Then LGF thoroughly crushed estimates in June and September 2013, coming in 233% and 214% above target. And in the most recent announcement, December 2013, Lions Gate "only" beat analysts' estimates by 16%.
Lions Gate looks to release their quarterly earnings numbers in the week of May 26. With a history of beating analysts' estimates and no sign of any negative surprise priced into the market value, there's a good chance Lions Gate will pop at the end of the month following the release.
Third, Lions Gate has performed somewhat weakly against its entertainment peers. Given that Lions Gate has world class creative talent and a seasoned executive team, if there's any reversion to the mean, Lions Gate is the perfect example.
With the PowerShares Dynamic Leisure & Entertainment ETF (AMEX:PEJ-Free Report) up about 100% on a year over year basis compared to Lions Gate's flat return, it certainly appears that investors simply need a reason to push the stock up. The May 26 earnings announcement could be that trigger.
Bottom Line
Overall, Lions Gate appears set for some strong returns in the coming months, being driven by strong projects in the pipeline, a proven history of beating analysts' estimates, as well as having a beaten-down stock ready for the rebound.
Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.
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