The Zacks Analyst Blog Highlights: Intel, BMC, Cisco, Accenture and Salesforce.com

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Jul 21, 2011, 09:30 ET

CHICAGO, July 21, 2011 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Intel (Nasdaq: INTC), BMC Inc. (Nasdaq: BMC), Cisco (Nasdaq: CSCO), Accenture (NYSE: ACN) and Salesforce.com (NYSE: CRM).

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Here are highlights from Wednesday's Analyst Blog:

Intel Delivers on Strong Revenue

Intel (Nasdaq: INTC) reported better than expected results for the second quarter after the close on July 20.

Earnings per share came in at 59 cents, beating the Zacks Consensus Estimate of 51 cents. This marks the chip maker's 10th consecutive positive earnings surprise. EPS rose 16% over the same quarter in 2010.

Revenue Strong

Revenue jumped 22% year-over-year to $13.112 billion, also ahead of the Zacks Consensus Estimate, which was $12.807 billion. It was Intel's 5th consecutive quarter of record revenue.

The company cited strong corporate demand, the continued rise in mobile devices and Internet traffic, and soaring demand for computing in emerging markets as the main drivers of growth.

Each business segment experienced double-digit revenue growth. The PC Client Group experienced revenue growth of 11% while the Data Center Group rose 15%. Intel® Atom microprocessor and chipset revenue fell 15% over the same period, however.

The gross margin fell from 67.2% in the second quarter of 2010 to 60.6% but was consistent with the company's expectations.

Outlook

Management expects to carry its strong momentum into the second half of 2011. Management projects annual revenue growth in the mid-20 percent range.

For the third quarter, management expects revenue between $13.5 and $14.5 billion and a gross margin around 65%.

Solid Balance Sheet

As of July 2, Intel had over $13 billion in cash, cash equivalents and securities compared with $2.1 billion in long-term debt. The company spent $2.0 billion repurchasing 93 million shares.

Intel also spent $961 million in the quarter paying dividends. It currently yields an attractive 3.3%.

INTC trades at just 10.2x 2011 earnings, a discount to the industry average of 15.0x. Shares are down slightly in after hours trading.

Earnings Preview: BMC Inc.

BMC Inc. (Nasdaq: BMC) is scheduled to announce its first quarter 2012 results on July 27, 2011.

We do not see too much variation in analysts' estimates at this point.

Fourth Quarter Overview

For its fourth quarter, the company reported earnings per share of 64 cents, which missed the Zacks Consensus Estimate of 66 cents.

Reported revenue of $562.0 million increased 14.0% year over year. The company is witnessing a significant shift in customer preference as major players in the IT industry are adopting cloud computing solutions, SaaS or virtualization in order to upgrade their existing infrastructure. With a clear focus on these identifiable areas, the company drove significant sales in the quarter.

BMC's growth strategy seems to have been accretive as suggested by improved bookings. The company witnessed significant upside in customer demand for service automation, SaaS and cloud solutions.

Operating income was $141.8 million, up 22.8% from $115.5 million reported in the year-ago quarter. Excluding special items like severance cost and amortization of intangible assets, but including stock-based compensation expense, non-GAAP operating income was $166.8 million in the reported quarter, up 21.8% year over year from $136.9 million.

For fiscal 2012, BMC expects non-GAAP diluted earnings per share in the range of $3.21 to $3.31, reflecting a year-over-year increase of 9% at the midpoint. BMC expects fiscal 2012 cash flow from operations of between $825 million and $875 million, reflecting an improvement of 11% at the midpoint.

Agreement of Analysts

Out of the six analysts providing estimates for the first quarter, none have revised their estimates over the last thirty days. Similarly, there were no upward or downward estimate revisions for fiscal year 2012.

The static estimates also indicate the absence of any major catalysts during the last thirty days. Consequently, analysts are maintaining their outlook for the upcoming quarter.

Some analysts expect a pick up to arise from increased systems management spending as enterprises look to increase efficiency and IT flexibility through private as well as public clouds. They believe that BMC will gain market share and witness strong growth in its Cloud Lifecycle Management offering, which accounted for 10% of ESM license bookings in 2011. Lastly, BMC expects a nearly 20% gain in productive sales headcount in fiscal 2012 and a decrease in attrition.

Moreover, analysts also believe that BMC's cloud partnerships with Cisco (Nasdaq: CSCO), Accenture (NYSE: ACN), and Salesforce.com (NYSE: CRM) will remain strong going forward, and the company is ramping up indirect distribution. Although the partnership with Cisco Unified Computing System (UCS) has been below expectations, Cisco as well as Accenture contributed to a number of wins for the company last year given the focus on cloud implementations. Management is working to increase its leverage of the indirect channel.

Magnitude of Estimate Revisions

The magnitude of revisions is also minimal since the company reported its fourth quarter results. Overall, estimates for the upcoming quarter have gone down from 60 cents to 57 cents (current) over the last 90 days, while the Zacks Consensus Estimate remained unchanged over the past 30 days.

For fiscal 2012, estimates have gone down from $2.80 to $2.78 (current) in the last 90 days. There has been no revision in estimates over the past 30 days. For 2013, estimates have gone down from $3.11 to $3.09 (current) in the last 90 days, with no change over the last 30 days.

Recommendation

BMC reported decent fourth quarter results. Moreover, the company provided a positive outlook for fiscal 2012. Acquisitions have expanded BMC's product portfolio and facilitated a more comprehensive offering. Growth prospects across most of its business segments, position in the government vertical and strong cash generation abilities are other positives.

However, we are a bit apprehensive about growing competition from big players such as International Business Machines Inc., Hewlett-Packard Company, EMC Corp. and CA Inc., which bundle hardware and software offerings. The debt level also appears high.

BMC currently holds a Zacks #3 Rank, which implies a short-term Hold rating.

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