Which Communications Networking Stocks have the Strongest Earnings Trends?

Earnings trends are extremely important when evaluating stocks. At Wall St. Cheat Sheet, we view increasing earnings quarter-over-quarter as a simple way to gauge whether costs and the business model are stable. Then we like to analyze whether the company is outperforming peers in the sector. This is what we call the “E-Squared” investment analysis (‘E = Earnings Are Increasing Quarter-Over-Quarter’ + ‘E = Excellent Relative Performance Versus Peers and Sector’).

Stocks with improving earnings metrics are worthy of your extra attention. Click here to discover our CHEAT SHEET stock picks now!

Here’s your Cheat Sheet to how the top 4 Communications Networking stocks rank via earnings trends:

Cisco Systems, Inc. (NASDAQ:CSCO): Current Price $21.54

Fiscal Year 2008 2009 2010 2011 2012
Revenue ($) in millions 39,540 36,120 40,040 43,220 46,060
Diluted EPS ($) 1.31 1.05 1.33 1.17 1.49

Revenues have grown steadily every year at Cisco though EPS is somewhat cyclical.

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Next, our CHEAT SHEET investing framework asks us to drill down to the recent quarterly data:

Quarter Jan. 31, 2012 Apr. 30, 2012 Jul. 31, 2012 Oct. 31, 2012 Jan. 31, 2013
Revenue ($) in millions 11,530 11,590 11,690 11,880 12,100
Diluted EPS ($) 0.40 0.40 0.36 0.39 0.59

EPS has also shown a jump in both the latest quarters. Cisco remains as a contender in this analysis.

Juniper Networks, Inc. (NYSE:JNPR): Current Price $18.72

Fiscal Year 2008 2009 2010 2011 2012
Revenue ($) in millions 3,572 3,316 4,093 4,449 4,365
Diluted EPS ($) 0.93 0.22 1.15 0.79 0.35

We are concerned that EPS is going downhill after 2010, and that revenue has flattened out during the last two years.

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Next, our CHEAT SHEET investing framework asks us to drill down to the recent quarterly data:

Quarter Dec. 31, 2011 Mar. 31, 2012 Jun. 30, 2012 Sep. 30, 2012 Dec. 31, 2012
Revenue ($) in millions 1,121 1,032 1,074 1,118 1,141
Diluted EPS ($) 0.18 0.03 0.11 0.03 0.18

But things appear to be on the mend as we note that EPS jumped nicely in the latest December quarter. Juniper manages to hang on in the race…

CIENA Corp. (NASDAQ:CIEN): Current Price $16.36

Fiscal Year 2008 2009 2010 2011 2012
Revenue ($) in millions 902.45 652.63 1,237 1,742 1,834
Diluted EPS ($) 0.42 -6.37 -3.58 -2.04 -1.45

Though Ciena appears to be getting a handle on its losses, which are showing a downward trend year-over-year.

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Next, our CHEAT SHEET investing framework asks us to drill down to the recent quarterly data:

Quarter Jan. 31, 2012 Apr. 30, 2012 Jul. 31, 2012 Oct. 31, 2012 Jan. 31, 2013
Revenue ($) in millions 416.68 477.62 474.09 465.53 453.09
Diluted EPS ($) -0.49 -0.28 -0.30 -0.38 -0.47

We do not like that streak of red across Ciena’s earnings grid and drop it from the reckoning in this analysis…

ADTRAN Inc. (NASDAQ:ADTN): Current Price $22.61

Fiscal Year 2008 2009 2010 2011 2012
Revenue ($) in millions 500.68 484.18 605.67 717.23 620.61
Diluted EPS ($) 1.22 1.17 1.78 2.12 0.74

Adtran showed good growth in sales and EPS during 2009-2011 but turned back the clock in 2012, reporting sharp drops in both topline and EPS.

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Next, our CHEAT SHEET investing framework asks us to drill down to the recent quarterly data:

Quarter Mar. 31, 2012 Jun. 30, 2012 Sep. 30, 2012 Dec. 31, 2012 Mar. 31, 2013
Revenue ($) in millions 134.74 184.00 162.12 139.76 143.01
Diluted EPS ($) 0.20 0.33 0.15 0.06 0.13

We note that EPS was on a downswing between the June 2012 and December 2012 quarters, but improved in March 2013. It stays on the watchlist…

Conclusion

In this ”E-Squared” investment analysis of Communications Networking stocks we find that Cisco Systems, Inc. (NASDAQ:CSCO) has the best earnings trend because it is the only company to report an improving EPS for two quarters in a row.

“E = Earnings Are Increasing Quarter-Over-Quarter” is a core component of our successful CHEAT SHEET investing framework. Don’t waste another minute – click here to discover our CHEAT SHEET stock picks now!