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Cramer: Making the Case for Cisco

Latest results show router and hardware maker navigating chip shortages well.
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Cisco Systems  (CSCO) - Get Cisco Systems, Inc. Report is a digital infrastructure supply firm, and one of the biggest players in the market. 

It recently announced its latest earnings, and this tech company has done quite well for itself, as Jim Cramer and the Action Alerts PLUS team noted:

"Cisco Systems reported ... a top- and bottom-line beat with its fiscal fourth-quarter results. Revenue of $13.1 billion (+8% YoY) edged the consensus of $13.039 billion, and adjusted earnings per share of 84 cents (+5% YoY) beat the consensus by two cents."

As a hardware manufacturer, Cisco has been one of the harder-hit companies in the post-Covid economy. Chip shortages have made it more difficult and expensive to build any computer-based product, such as the routers and other communications equipment that Cisco is known for. This makes the company’s performance even more noteworthy, although investors shouldn’t expect those clouds to clear up just yet.

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"Supply challenges and cost impacts are expected to continue at least through the first half of their fiscal year and possibility into the second half, said [CEO Chuck Robbins]. And while price erosion was a theme in the recent quarter, Cisco implemented on Aug. 7 a price increase in a few product areas that have seen higher component costs. Management expects the benefit of these higher prices will come into play in the second and third quarters vs. what they see in the first."

Cisco has software businesses that continue to perform well, and are not particularly vulnerable to chip shortages and other supply chain issues. It has adapted its other business units to the market, and its stock continues to do well.

"Overall, we thought there was a lot to like about the quarter. Management successfully navigated through its supply chain challenges to deliver an earnings beat, software revenues continued to grow at a very solid pace, and the strength in orders suggests even better times are ahead for the company."

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