Welcome!

IBM Cloud Authors: Liz McMillan, Sematext Blog, Olivier Huynh Van, Elizabeth White, Pat Romanski

News Feed Item

The Zacks Analyst Blog Highlights: Cisco Systems, IBM, Lithia Motors, Constellation Brands and Barrett Business Services

CHICAGO, Aug. 14, 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), Lithia Motors Inc. (NYSE:LAD-Free Report), Constellation Brands Inc. (NYSE:STZ-Free Report) and Barrett Business Services Inc. (Nasdaq:BBSI-Free Report).

Zacks Investment Research, Inc., www.zacks.com

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 Again on Top and Bottom Lines

Cisco Systems (Nasdaq:CSCO-Free Report) has reported its fiscal Q4 2014 earnings after the bell Wednesday, with typically positive results: the tech giant posted earnings per share (EPS) of 50 cents per share (actual, GAAP) on total sales in the quarter of $12.36 billion. This topped the Zacks consensus estimates of 48 cents per share on $12.12 billion in revenues, respectively.

It would seem at first blush that Cisco's foray a few years back diving into cloud-based solutions is showing signs of paying off, especially with beating expectations on the revenue side (an earnings beat for Cisco is a no-brainer by this point; the company hasn't posted a negative earnings surprise since 2008). Cisco's products (consisting of mostly routers and switchers, where they are still a first-tier producer) brought in $9.5 billion in the quarter, while services garnered $2.8 billion.

It will likely take the conference call coming a bit later to really dig into the substance of these numbers, especially regarding guidance for fiscal year 2015, but the year-over-year growth is likely a good sign that the move toward the "Intercloud" is now bearing some fruit. Gross margins seem to be a bit under pressure, which has been the case with Cisco -- as well as plenty other big names in tech trying to make the jump into the high-growth end, like IBM (NYSE:IBM-Free Report) -- for a while now.

Cisco also bought back 1.5 billion in CSCO shares for the quarter, another thing investors have come to expect. The company's 4% positive earnings surprise is about exactly the average for the past four quarters, as well. What's nice to see for Cisco that's not so typical is the back-to-back beats on the top line.

Analysts typically have made no adjustments to earnings expectations for Cisco Systems in the quarter; once guidance is established and certain aspects are discussed on the call -- among them enterprise IT spending trends, growth in China and Cisco's 9% revenue exposure in Russia -- investors will have a better idea how to play the Zacks Rank #3 stock going forward. Year to date, Cisco shares are up 12%, but year over year they're down about 4%.

3 Stocks to Brave a Volatile Market

While the naysayers warn of a crash every time the market hiccups, it is evident that we are currently in one of the most powerful and resilient bull markets we've seen in a long time. Five years of cheap money, pumped-up stock prices and gradually rebuilding investor confidence have powered the market to reach some uncharted territories.

But how long can it last? Amid the melee between the bulls and the bears, a layman investor might get lost. Choosing stocks that promise earnings growth may not be enough to ensure returns if the much-dreaded crash finally hits. And even if one manages to find some stocks that have enough potential to hold ground, investing in most them might not be that lucrative as most of them no longer hold reasonable valuations.

Let's find some stocks using traditional indicators of stability and growth.

What Drives the Bottom Line?

Sales drive earnings, earnings drive the stock price. This time-honored adage still holds true as an investment idea reviewed in bare essentials.

Since the most recent recession hit six years ago, many companies have slashed costs and restructured operations to become leaner and more efficient. This has translated into improved profit margins, leading to earnings growth despite sedated sales growth.

But earnings advancements based on margin expansion can outpace sales growth for only so long. Over the long term, earnings growth typically trails along the lines of revenue growth.

Companies have been aggressively chasing growth in recent times, as evidenced by the spurt in mergers and acquisitions. Granted, the companies had huge amounts of cash reserves, and the credit markets were practically encouraging them to lever up. But the primary reason remained the relentless pursuit of top-line growth that has become harder and harder to come across in these tricky economic conditions.

Such behavior by the companies only serves to underline the importance of robust revenue growth as a key metric to select stocks.

What Drives Revenues?

Consumer spending is a direct determinant of business sales. With the GDP growing at an impressive rate of 4% in the second quarter, the economy seems to be gaining momentum after shrinking 2.1% in the previous quarter. The unemployment rate is steadily declining. And as hiring picks up, consumer demand will follow suit. Acceleration in wage growth could also boost consumer spending.

In fact, the country trade deficit for June shrank 7%, which could imply a modest upward revision to the already strong second-quarter GDP estimates. Most importantly, it prompts gutsy third-quarter GDP expectations.

As U.S. consumer spending accounts for over two-thirds of the economic output, GDP expansion augurs well for organic growth of the business community.

The Power of Industry Rank

Research indicates that about half the price performance of a stock can be attributed to the industry group that it belongs to. Using a sorting metric called Zacks Industry Rank, one can screen for stocks that belong to the top-performing industries. A top Zacks Industry Rank signifies that more stocks within that group are likely to have upward earnings estimate revisions, implying bullish outlook for the industry.

Historically too, we have found that the top 50% of Zacks-Ranked Industries outperform the bottom 50% by a factor of more than 2 to 1. So it's a good idea to leverage the Zacks Industry Rank to shortlist stocks.

Growth & Valuation Metrics

Apart from a strong track record of sales growth and a robust industry rank, one should look for companies with strong long–term growth expectations. This should help select companies with strong earnings potential driven by revenue growth.

We have shortlisted three stocks based on the above metrics and incorporating valuation multiples. All these stocks are trading at a discount to their respective peer group average forward P/E and P/S ratios.

Lithia Motors Inc. (NYSE:LAD-Free Report)

Lithia Motors is a leading automobile retailer and automotive franchisee in the U.S., serving both urban and rural markets. With the auto market continuing to enjoy robust momentum, Lithia Motors is displaying healthy growth across its segments.

The auto dealer has been on an acquisition spree lately, acquiring/opening eight stores so far this year. The acquisitions of Vic Alfonso Cadillac, Braley & Graham Buick GMC and Access Ford Lincoln are expected to add $165 million annually to its revenues. The company is also set to acquire DCH Auto Group Inc., which will augment revenues by $2.3 billion approximately per annum.

The Retail/Wholesale Auto/Truck industry currently holds a Zacks Industry Rank of 34 out of 265 industries, placing it in the top 15% bracket.

Sales Growth in Previous Year = 20.8%

Long-Term Growth Consensus Estimate = 25%

P/E Ratio: 18.1; Peer Group P/E Ratio: 24.2

P/S Ratio: 0.5; Peer Group P/S Ratio: 1.0

Zacks Rank #1 (Strong Buy)

Constellation Brands Inc. (NYSE:STZ-Free Report)

Constellation Brands is a leading international producer and marketer of beverage alcohol brands, boasting a formidable portfolio of popular labels across the wine, spirits and imported beer categories. The company is the largest multi-category alcohol supplier in the U.S. and the largest wine company in the world.

The company's top-line has benefited from the consolidation of the Crown Import business as well as robust demand for beer. Last year, the company acquired Grupo Modelo's U.S. beer business for a sum of $4.75 billion, boosting its sales by $2 billion in fiscal 2014.

Constellation's beer segment now represents about half of its total sales; and it grew a strong 10% last year, on the back of new product offerings, new points of distribution and effective marketing and advertising strategies.

The Alcoholic Beverages industry currently holds a Zacks Industry Rank of 34 out of 265 industries, placing it in the top 13% bracket.

Sales Growth in Previous Year = 72.6%

Long-Term Growth Consensus Estimate = 17.3%

P/E Ratio: 19.9; Peer Group P/E Ratio: 20.3

P/S Ratio: 3.0; Peer Group P/S Ratio: 13.7

Zacks Rank #2 (Buy)

Barrett Business Services Inc. (Nasdaq:BBSI-Free Report)

Barrett Business Services, an outsourcing firm, provides business management solutions, combining human resource outsourcing and professional management consulting. With the company's brand gaining more recognition, its client penetration is reaching deeper, ranging from industries such as telecommunications and transportation & shipping to manufacturing and food processing.

The company's commendable sales growth in recent times was attributable to organic growth arising from existing client base as well as strong referral channels. Also, the company's client retention rate of over 90% indicates sustained revenue growth acceleration, going forward.

The outsourcing industry currently holds a Zacks Industry Rank of 96 out of 265 industries, placing it in the top 36% bracket.

Sales Growth in Previous Year = 32.3%

Long-Term Growth Consensus Estimate = 22.5%

P/E Ratio: 18.8; Peer Group P/E Ratio: 20.1

P/S Ratio: 0.7; Peer Group P/S Ratio: 2.8

Zacks Rank #1

Bottom Line

The crux remains that the top-line drives the bottom-line. A trend of bottom-line growth consistently outpacing top-line growth in most quarters has been a matter of concern throughout the recovery. Companies have jacked up earnings for years by slashing costs. However, going forward, it is clear that only companies with strong revenue growth prospects can retain their earnings momentum and augment shareholder wealth.

Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.

About Zacks Equity Research

Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.

Continuous coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.

Zacks "Profit from the Pros" e-mail newsletter provides highlights of the latest analysis from Zacks Equity Research. Subscribe to this free newsletter today.

About Zacks

Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978. The later formation of the Zacks Rank, a proprietary stock picking system; continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros. In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time! Register for your free subscription to Profit from the Pros.

Get the full Report on CSCO - FREE

Get the full Report on IBM - FREE

Get the full Report on LAD - FREE

Get the full Report on STZ - FREE

Get the full Report on BBSI - FREE

Follow us on Twitter: http://twitter.com/zacksresearch

Join us on Facebook: http://www.facebook.com/home.php#/pages/Zacks-Investment-Research/57553657748?ref=ts

Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.

Media Contact

Zacks Investment Research

800-767-3771 ext. 9339

support@zacks.com

http://www.zacks.com

Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.

Logo - http://photos.prnewswire.com/prnh/20101027/ZIRLOGO

SOURCE Zacks Investment Research, Inc.

More Stories By PR Newswire

Copyright © 2007 PR Newswire. All rights reserved. Republication or redistribution of PRNewswire content is expressly prohibited without the prior written consent of PRNewswire. PRNewswire shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon.

@ThingsExpo Stories
Internet of @ThingsExpo, taking place November 1-3, 2016, at the Santa Clara Convention Center in Santa Clara, CA, is co-located with the 19th International Cloud Expo and will feature technical sessions from a rock star conference faculty and the leading industry players in the world and ThingsExpo Silicon Valley Call for Papers is now open.
Cognitive Computing is becoming the foundation for a new generation of solutions that have the potential to transform business. Unlike traditional approaches to building solutions, a cognitive computing approach allows the data to help determine the way applications are designed. This contrasts with conventional software development that begins with defining logic based on the current way a business operates. In her session at 18th Cloud Expo, Judith S. Hurwitz, President and CEO of Hurwitz & ...
SYS-CON Events announced today that ReadyTalk, a leading provider of online conferencing and webinar services, has been named Vendor Presentation Sponsor at the 19th International Cloud Expo, which will take place on November 1–3, 2016, at the Santa Clara Convention Center in Santa Clara, CA. ReadyTalk delivers audio and web conferencing services that inspire collaboration and enable the Future of Work for today’s increasingly digital and mobile workforce. By combining intuitive, innovative tec...
There is growing need for data-driven applications and the need for digital platforms to build these apps. In his session at 19th Cloud Expo, Muddu Sudhakar, VP and GM of Security & IoT at Splunk, will cover different PaaS solutions and Big Data platforms that are available to build applications. In addition, AI and machine learning are creating new requirements that developers need in the building of next-gen apps. The next-generation digital platforms have some of the past platform needs a...
Almost two-thirds of companies either have or soon will have IoT as the backbone of their business in 2016. However, IoT is far more complex than most firms expected. How can you not get trapped in the pitfalls? In his session at @ThingsExpo, Tony Shan, a renowned visionary and thought leader, will introduce a holistic method of IoTification, which is the process of IoTifying the existing technology and business models to adopt and leverage IoT. He will drill down to the components in this fra...
SYS-CON Events announced today that Pulzze Systems will exhibit at the 19th International Cloud Expo, which will take place on November 1–3, 2016, at the Santa Clara Convention Center in Santa Clara, CA. Pulzze Systems, Inc. provides infrastructure products for the Internet of Things to enable any connected device and system to carry out matched operations without programming. For more information, visit http://www.pulzzesystems.com.
I'm a lonely sensor. I spend all day telling the world how I'm feeling, but none of the other sensors seem to care. I want to be connected. I want to build relationships with other sensors to be more useful for my human. I want my human to understand that when my friends next door are too hot for a while, I'll soon be flaming. And when all my friends go outside without me, I may be left behind. Don't just log my data; use the relationship graph. In his session at @ThingsExpo, Ryan Boyd, Engi...
The Transparent Cloud-computing Consortium (abbreviation: T-Cloud Consortium) will conduct research activities into changes in the computing model as a result of collaboration between "device" and "cloud" and the creation of new value and markets through organic data processing High speed and high quality networks, and dramatic improvements in computer processing capabilities, have greatly changed the nature of applications and made the storing and processing of data on the network commonplace.
In his general session at 18th Cloud Expo, Lee Atchison, Principal Cloud Architect and Advocate at New Relic, discussed cloud as a ‘better data center’ and how it adds new capacity (faster) and improves application availability (redundancy). The cloud is a ‘Dynamic Tool for Dynamic Apps’ and resource allocation is an integral part of your application architecture, so use only the resources you need and allocate /de-allocate resources on the fly.
From wearable activity trackers to fantasy e-sports, data and technology are transforming the way athletes train for the game and fans engage with their teams. In his session at @ThingsExpo, will present key data findings from leading sports organizations San Francisco 49ers, Orlando Magic NBA team. By utilizing data analytics these sports orgs have recognized new revenue streams, doubled its fan base and streamlined costs at its stadiums. John Paul is the CEO and Founder of VenueNext. Prior ...
SYS-CON Events announced today that Numerex Corp, a leading provider of managed enterprise solutions enabling the Internet of Things (IoT), will exhibit at the 19th International Cloud Expo | @ThingsExpo, which will take place on November 1–3, 2016, at the Santa Clara Convention Center in Santa Clara, CA. Numerex Corp. (NASDAQ:NMRX) is a leading provider of managed enterprise solutions enabling the Internet of Things (IoT). The Company's solutions produce new revenue streams or create operating...
WebRTC adoption has generated a wave of creative uses of communications and collaboration through websites, sales apps, customer care and business applications. As WebRTC has become more mainstream it has evolved to use cases beyond the original peer-to-peer case, which has led to a repeating requirement for interoperability with existing infrastructures. In his session at @ThingsExpo, Graham Holt, Executive Vice President of Daitan Group, will cover implementation examples that have enabled ea...
IoT offers a value of almost $4 trillion to the manufacturing industry through platforms that can improve margins, optimize operations & drive high performance work teams. By using IoT technologies as a foundation, manufacturing customers are integrating worker safety with manufacturing systems, driving deep collaboration and utilizing analytics to exponentially increased per-unit margins. However, as Benoit Lheureux, the VP for Research at Gartner points out, “IoT project implementers often ...
The Jevons Paradox suggests that when technological advances increase efficiency of a resource, it results in an overall increase in consumption. Writing on the increased use of coal as a result of technological improvements, 19th-century economist William Stanley Jevons found that these improvements led to the development of new ways to utilize coal. In his session at 19th Cloud Expo, Mark Thiele, Chief Strategy Officer for Apcera, will compare the Jevons Paradox to modern-day enterprise IT, e...
SYS-CON Events announced today the Enterprise IoT Bootcamp, being held November 1-2, 2016, in conjunction with 19th Cloud Expo | @ThingsExpo at the Santa Clara Convention Center in Santa Clara, CA. Combined with real-world scenarios and use cases, the Enterprise IoT Bootcamp is not just based on presentations but with hands-on demos and detailed walkthroughs. We will introduce you to a variety of real world use cases prototyped using Arduino, Raspberry Pi, BeagleBone, Spark, and Intel Edison. Y...
Complete Internet of Things (IoT) embedded device security is not just about the device but involves the entire product’s identity, data and control integrity, and services traversing the cloud. A device can no longer be looked at as an island; it is a part of a system. In fact, given the cross-domain interactions enabled by IoT it could be a part of many systems. Also, depending on where the device is deployed, for example, in the office building versus a factory floor or oil field, security ha...
Is your aging software platform suffering from technical debt while the market changes and demands new solutions at a faster clip? It’s a bold move, but you might consider walking away from your core platform and starting fresh. ReadyTalk did exactly that. In his General Session at 19th Cloud Expo, Michael Chambliss, Head of Engineering at ReadyTalk, will discuss why and how ReadyTalk diverted from healthy revenue and over a decade of audio conferencing product development to start an innovati...
Fifty billion connected devices and still no winning protocols standards. HTTP, WebSockets, MQTT, and CoAP seem to be leading in the IoT protocol race at the moment but many more protocols are getting introduced on a regular basis. Each protocol has its pros and cons depending on the nature of the communications. Does there really need to be only one protocol to rule them all? Of course not. In his session at @ThingsExpo, Chris Matthieu, co-founder and CTO of Octoblu, walk you through how Oct...
SYS-CON Events announced today that Bsquare has been named “Silver Sponsor” of SYS-CON's @ThingsExpo, which will take place on November 1–3, 2016, at the Santa Clara Convention Center in Santa Clara, CA. For more than two decades, Bsquare has helped its customers extract business value from a broad array of physical assets by making them intelligent, connecting them, and using the data they generate to optimize business processes.
Identity is in everything and customers are looking to their providers to ensure the security of their identities, transactions and data. With the increased reliance on cloud-based services, service providers must build security and trust into their offerings, adding value to customers and improving the user experience. Making identity, security and privacy easy for customers provides a unique advantage over the competition.