Analysts Weigh In on Two Stock Giants: Chevron Corporation (CVX), Cisco Systems, Inc. (CSCO)

Analysts weigh in on the energy giant Chevron Corporation (NYSE:CVX) and networking giant Cisco Systems, Inc. (NASDAQ:CSCO), offering compelling reasons for their ratings and summarizing expectations.

Chevron Corporation

Chevron is set to announce its 3Q15 earnings on October 30. Ahead of the event, Fadel Gheit from Oppenheimer weighed in on the stock, assigning a Perform rating to the stock without giving a price target.

In its earnings, Gheit expects Chevron to reiterate its commitment to dividend growth, maintenance of its AA credit rating, and funding the projects with highest expected returns to boost the company’s earnings in the future. The analyst also expects the company to outline how it will cope if oil prices continue to stay at low levels, and in such a scenario how the company will manage to become cash flow neutral in the next two years.

Gheit commented, “CVX earnings are the most leveraged in the group to oil prices, with a $350 million net income impact for $1/b change in oil price.” However, he adds that during the last 15 months, CVX’s stock has been the worst performing among its peer group.

Referring to his estimates for 3Q15, he expects earnings of $0.74 per share; down 11% year-over-year; due to lower oil prices. However he expects the lower earnings to be offset by better downstream earnings of nearly $1.6 billion, which are up 40% YoY and 28% from the previous quarter.

Assuming brent at ~$54/b, WTI of ~$50/b, and natural gas at >$2.75/ mcf, Gheit expects operating cash flows of $23.6 billion in the current year and $24.1 billion next year for partially funding CAPEX of $29.4 billion and $25.6 billion respectively and dividend of approximately $8 billion.

All these figures are based on an assumption of a slow and modest recovery in oil prices.

Out of 11 analysts on TipRanks who have recently rated Chevron’s stock, 3 have rated it as Buy, 7 have rated it as Hold, and 1 has rated it as Sell. The average consensus price target for Chevron is $95, an upside of 5.68% over current levels.Chevron consensus

Cisco Systems, Inc.

Recently, analysts from William Blair have had discussions with enterprise resellers across North America and Europe. Based on these discussions, analyst Jason Ader weighed in on Cisco, reiterating an Outperform rating without providing a price target.

Ader feels that Cisco is poised to deliver another strong quarter based on factors such as strong sales of the company’s security offerings, which includes a strong growth in next-generation firewalls; ongoing refresh activity in enterprise switching and routing; positive traction for Nexus 9K switches and ACI (Application-centric infrastructure); and continuous market share gains in UCS (Unified Computing System) even though the spending environment for servers is tight.

Talking about his expectations for Cisco’s fiscal first quarter he said, “We believe Cisco is poised to meet or beat consensus estimates for the fiscal first quarter, calling for revenue growth of 3% year-on-year and non-GAAP EPS of $0.56. Cisco remains our top large-cap pick.” The analyst explains his outperform rating, noting, “Cisco shares are trading at 12.0 times straight P/E multiple on our calendar 2016 earnings,” which is lower than the median of other large-cap IT companies of 12.5 times. Furthermore, Ader says, “Cisco shares are trading at roughly 9.1 times P/E multiple on our calendar 2016 earnings.”

Out of 16 analysts who have recently rated Cisco’s stock on TipRanks, 11 have rated is Buy, 4 have rated it as Hold, and 1 has rated it as Sell. The consensus price target for the stock is $32.96, an upside of 15.65% over current levels.Cisco consensus



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