The return to prominence of Cisco Systems Inc. (NASDAQ: CSCO) was not an overnight affair, but with the release of the networking giant’s most recent earnings, it is clear the company is back with a vengeance. It is also clear that what is good for Cisco is also good for companies that do business with it, and a new RBC report highlight companies that may stand to benefit.
The RBC team focused in on the technology supply chain companies that supply integral parts and services to Cisco. They also noted that demand is coming in much better than feared in the core switching and routing markets. While they are clear to point out that it may represent a “modest positive” for the companies, with everything full speed ahead at Cisco and the business diversifying fast, the real upside is probably a true unknown.
Here are the companies the RBC analysts think could directly benefit from improvement at Cisco, and all are rated Outperform.
This industry giant could not only gain business from Cisco, but others could step up to the plate. Amphenol Corp. (NYSE: APH) is one of the top picks this year at RBC, which sees the company benefiting from the Cisco strength as about 4% of total sales are to Cisco. Amphenol is one of the world’s largest designers, manufacturers and marketers of electrical, electronic and fiber optic connectors, interconnect systems, antennas, sensors and sensor-based products and coaxial and high-speed specialty cable. Amphenol designs, manufactures and assembles its products at facilities in the Americas, Europe, Asia, Australia and Africa and sells them through its own global sales force, independent representatives and a global network of electronics distributors.
While the RBC team sees the Cisco improvement as net-neutral for the company, they do note that Amphenol’s IT and data communication revenue increased in the June quarter, but was somewhat offset by networking and storage. They do model the IT and data communications business to grow as a result of the Cisco guidance.
Amphenol investors are paid a small 1% dividend. RBC has a $64 price target on the stock. The Thomson/First Call consensus estimate is $60.42. Shares closed trading on Thursday at $55.45.