Communication equipment refers to hardware that is used for telecommunication purposes. These products include a vast spread of communication technologies, that include transmission lines, satellites, radios, routers, and even smartphones. The companies in this field are often engaged with telecommunication service providers.
In November, President Biden signed a $1 trillion-plus infrastructure bill into law. The bill allocates $65 billion for improving broadband internet access in rural areas. During the pandemic, the wireless industry has benefitted from user dependence for work and education. In addition, the demand for 5G services has increased, and companies are investing significantly to deploy 5G solutions as soon as possible. The global 5G services market is expected to grow at a 30.3% CAGR from 2022 - 2026, which could increase the need for advanced communication equipment.
Furthermore, the global telecom equipment market is expected to reach $866.8 billion by 2028, surging at a 6% - 8% CAGR. Therefore, we think fundamentally strong communication equipment stocks Cisco Systems, Inc. (CSCO), Motorola Solutions, Inc. (MSI), Zebra Technologies Corporation (ZBRA), and Juniper Networks, Inc. (JNPR) might be solid bets.
Cisco Systems, Inc. (CSCO)
CSCO is a multinational corporation operating in communications and Information Technology, designing, manufacturing, and selling Internet Protocol-based networking and related products. The San Jose, Calif.-based concern sells its services directly to consumers and through distributors.
On December 1, a telecom company, Verizon Communications Inc. (VZ), announced that it would enhance its Network-as-a-Service (NaaS) digitization strategy by deploying CSCO’s SD-WAN services, including 4G/5G connectivity, automation, and AI solutions. The service offering to VZ is expected to be profitable for CSCO.
For its fiscal first quarter, ended October 30, CSCO’s total revenue increased 8.1% year-over-year to $12.90 billion. Its non-GAAP operating income rose 10% from the prior-year quarter to $4.29 billion. Its non-GAAP net income improved 8.2% year-over-year to $3.48 billion, while non-GAAP EPS came in at $0.82, indicating a 7.9% increase from the same period last year.
A $3.42 consensus EPS estimate for the current year (fiscal 2022) reflects a 6.2% year-over-year increase. Likewise, the $52.74 billion consensus revenue estimate for the current year reflects a 5.9%increase from the prior year. Also, CSCO has an impressive earnings surprise history; it has topped consensus EPS estimates in each of the trailing four quarters.
The stock has gained 33.7% in price over the past year and 32.4% year-to-date to close Friday’s trading session at $59.25. It is currently trading above its 50-day and 200-day moving averages of $55.93 and $54.36, respectively.
CSCO’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
CSCO has a Quality grade of A and a Stability grade of B. In the B-rated, 55-stock Technology – Communication/Networking industry, it is ranked #7.
In addition to the POWR Ratings we have stated above, one can see CSCO ratings for Growth, Value, Momentum, and Sentiment here.
Motorola Solutions, Inc. (MSI)
MSI is a mission-critical communication and international analytics provider that operates through the two broad segments—Products and Systems Integration; and Services and Software. The Schaumburg, Ill., company offers its products and services to the government, public safety, and commercial communication networks.
On November 18, MSI increased its regular quarterly dividend to 79 cents per share, payable to shareholders on January 14, 2022. The dividend increase reflects the company’s ability and willingness to pay back its shareholders.
On November 10, it was reported that the Secretariat of Public Security and Social Defense (SEGUP) of Pará, Brazil, chose MSI to modernize its mission-critical communications and connect all the public safety agencies across the region. This contractual win demonstrates the company’s solid position in the global market.
MSI’s net sales increased 12.8% year-over-year to $2.11 billion in its fiscal third quarter, ended October 2. This can be attributed to a 17% rise from the prior-year quarter in net sales to $1.22 billion. Its non-GAAP operating earnings and non-GAAP EPS came in at $555 million and $2.35, respectively, up 19.9% and 20.5% from the same period last year.
The Street’s $9.05 EPS estimate of $9.05 for the current year (fiscal 2021) indicates a 17.7% year-over-year improvement. And the Street’s $8.18 billion revenue estimate for the current year reflects a 10.4% rise from the prior year. In addition, MSI has topped consensus EPS estimates in each of the trailing four quarters.
MSI’s shares have gained 57.3% in price over the past year to close Friday’s trading session at $264.92. It has gained 55.8% year-to-date. The stock is currently trading above its 50-day moving average of $248.71 and its 200-day moving average of $221.25.
It is no surprise that MSI has an overall B rating, which translates to Buy in our POWR Rating system. The stock has a B grade for Quality. It is ranked #13 in the Technology – Technology – Communication/Networking .
Click here to see the additional POWR Ratings for MSI (Growth, Value, Momentum, Stability, and Sentiment).
Zebra Technologies Corporation (ZBRA)
ZBRA in Lincolnshire, Ill., operates through Asset Intelligence & Tracking and Enterprise Visibility & Mobility segments and provides enterprise asset intelligence solutions, designing and manufacturing labels-producing printers, wristbands, tickets, and plastic cards.
On October 21, ZBRA introduced its new comprehensive picking solution. The fulfillment solution comprises three new automated robots and a software package. The new offerings are expected to expand its product portfolio and strengthen its position in automation and digitization of critical workflows.
Earlier in October, ZBRA announced the completion of its acquisition of AI-powered Software-as-a-Service (SaaS) provider, antuit.ai, for forecasting and merchandising in the retail and CPG industries. The acquisition should expand the company’s operational capability.
For its fiscal third quarter, ended October 2, ZBRA’s total net sales increased 26.9% year-over-year to $1.44 billion. Its gross profit improved 31% from the same period last year to $646 million. Its non-GAAP net income and non-GAAP EPS rose 40% and 39.1%, respectively, from the prior-year quarter to $245 million and $4.55.
Analysts expect ZBRA’s EPS to increase 43% year-over-year to $18.30 in the current year (fiscal 2021). And the Street expects its revenue to improve 26% from the last year to $5.61 billion in the current year. ZBRA has topped consensus EPS estimates in each of the trailing four quarters.
Over the past year, the stock has gained 62.8% to close Friday’s trading session at $614.55. It has gained 59.9% year-to-date. It is currently trading above its 50-day and 200-day Moving Averages of $562.85 and $531.45.
ZBRA’s promising prospects are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system. The stock has a Sentiment and Quality grade of B. In the 78-stock, B-rated Industrial – Machinery industry, it is ranked #16. .
To see the additional POWR Ratings for Growth, Value, Momentum, and Stability for ZBRA, click here.
Juniper Networks, Inc. (JNPR)
JNPR is a worldwide designer, developer, and marketer of network products. The Sunnyvale, Calif.-based company’s offerings include ACX series universal access routers, MX series ethernet routers, PTX series packet transport routers, and NorthStar controllers.
On December 10, the Aston Martin Cognizant Formula One™ Team announced that JNPR had been chosen as its Official Networking Equipment Vendor. JNPR expects to expand its networking portfolio and continue its expansion and development program through this partnership.
On December 8, JNPR was selected by Indian communications solutions provider Bharti Airtel to deliver network upgrades for the expansion of its nationwide broadband coverage. Regarding this partnership, Sajan Paul, Managing Director & Country Manager, India & SAARC, JNPR, said, “As Airtel gears up their network for 5G, we are excited to continually contribute towards their network transformation, not just in support of their fiber-to-the-home broadband services expansion, but also for other use cases and applications across various business segments."
JNPR’s total net revenues increased 4.4% year-over-year to $1.19 billion in its fiscal third quarter, ended September 30. Its gross margin rose 5.2% from the same period last year to $692.20 million. Its non-GAAP net income and non-GAAP net income per share came in at $152 million and $0.46, respectively, up 5.3% and 7% from the prior-year quarter.
A $1.72 consensus EPS estimate for the current year (fiscal 2021) reflects an 11% year-over-year increase. And the $4.70 billion consensus revenue estimate for the current year reflects a 5.8% increase from the prior year. Furthermore, JNPR has beaten consensus EPS estimates in three out of the trailing four quarters.
The stock has gained 55.1% in price over the past year and 51% year-to-date to close Friday’s trading session at $34.00. The stock is currently trading above its 50-day Moving Average of $30.40 and its 200-day Moving Average of $27.85.
JNPR has an overall B rating, which translates to Buy in our POWR Rating system. The stock has a B grade for Value and Quality. It is ranked #10 in the Technology – Communication/Networking industry.
Click here to see the additional POWR Ratings for JNPR (Growth, Momentum, Stability, and Sentiment).
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CSCO shares were trading at $58.92 per share on Monday afternoon, down $0.33 (-0.56%). Year-to-date, CSCO has gained 35.53%, versus a 26.38% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research.4 Communication Equipment Stocks Surging to New Highs with More Room to Run appeared first on StockNews.com