Today's edition of the Saxo Morning Call features the SaxoStrats team discussing the continuing weakness of the US dollar as commodity prices recover ground and in the wake of key US equity indices hitting all-time highs Thursday.
Article / 07 August 2015 at 10:00 GMT

Earnings Watch: Cisco to benefit from upgrade cycle

  • CIsco, Nestle and Kraft Heinz among next week's bluechips
  • Analysts favour Kraft Heinz with buy/hold recommendations
  • Cisco share treads water despite expected earnings uptick

By Mads Koefoed

Following several hectic weeks filled to the brim with company announcements – including Walt Disney which despite beating expectations on EPS offered a cautious outlook and the stock sold off as a result – we shift down a bit in gears next week as "only" 85 companies in the S&P Global 1200 index will report earnings. But there are still some some large companies worth keeping an eye out for including Cisco, Nestle, and Kraft Heinz.

Kraft Heinz (Q2, August 10, after market): In Q2 Heinz completed its purchase of Kraft Foods thereby creating a global player in the food and beverages industry while Warren Buffett has joined the board. The new stock has begun trading amid a string of buy and hold recommendations (eight and seven respectively) while just one analyst has a sell recommendation. Analysts look for the company to present Q2 revenue of $4.7 billion and earnings per share (EPS) of $0.84 on a diluted basis (excluding abnormal items).

Cisco (Q4, August 12, after market): The IT giant, Cisco, based in San Jose, California, has seen its stock do practically nothing so far this year, trading close to $28 at all times. This is quite interesting considering that Cisco is expected to increase its earnings by enough to push down the P/E multiple from 16.1 to 13. The company is well placed to benefit from the upcoming upgrade cycle in WLAN.

Analysts see upside potential of 14%  targeting a share price of $32.1 on average, and Cisco is expected to present Q4 earnings of $0.56 (27% y/y) on revenue of $12.66 billion (2.4% y/y). The strong US dollar has impacted many companies' Q2 reports but while Cisco will be affected too, a large majority of its pricing is in USD so the headwind should be minimal.

Nestle (H1, August 13): Swiss packaged food behemoth Nestle will present H1 results which are expected to include  sales of around CHF 43.2 billion (+0.5% y/y) and earnings of CHF 1.54 per share, which translates into a gain of 6.2% from 1H'14. Analysts are not too keen on the stock with a limited upside seen at 2.8% over the next twelve months with 18 of 37 analysts having a hold recommendation. The deflationary environment in some of Nestle's key markets puts downward pressure on the company's pricing power and there is also a risk from FX movements (in both directions, of course.).

 The merger is complete, Buffet is on board and analysts are lovin' it. Image: Kraft Heinz

– Edited by Clare MacCarthy
Mads Koefoed is head of macro strategy at Saxo Bank


The Saxo Bank Group entities each provide execution-only service and access to permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on or as a result of the use of the Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. When trading through your contracting Saxo Bank Group entity will be the counterparty to any trading entered into by you. does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of ourtrading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws. Please read our disclaimers:
- Notification on Non-Independent Invetment Research
- Full disclaimer

Check your inbox for a mail from us to fully activate your profile. No mail? Have us re-send your verification mail