Taylor and Juan
Financial Written Report
October 17, 2018
Corporate Finance
Cisco and Tenaris
Cisco is a company that sells internet networking products and other services related to
communications and information technology. These products include routing products that
connect private and public networks, data center products, and wireless access points for voice,
video, and data applications. They also offer services such as web security, threat protections
and security barriers. Their headquarters are located in San Jose, California. Cisco is a large cap
company.
Tenaris is a company that operates in North America, South America, Europe, Middle
East, Africa, and the Asia Pacific. They produce and sell seamless and welded steel tube
products that oil and gas drilling companies use. These products include casing and tubing
products, premium connections, drill pipes, coiled tubing, hot-rolled and cold-drawn seamless
tubes, tubular and non-tubular accessories along with other services relating to the gas and oil
industry. Tenaris is a medium cap company.
Cisco has been paying more interest in their payable borrowings and a net loss of $3.7
billion. Their stocks have also seen a loss of $0.76 per share due to the $11.1 billion provisional
tax expense related to the enactment of the tax cuts and jobs act, also known as the “tax act”.
Cisco has decreased assets because they have been increasing their revenue through
recurring software and subscription offers. Their long-term debt has overall stayed steady with
a small decrease in the last year. We see a decrease in their common stock due to their
repurchase of approximately 140 million shares of common stock under their repurchase
program.
Cisco has increased their investments based on innovations, by software and
subscriptions. They have an increase in dividends paid due to the fact they have been paying
out. Since the company has been trying to reduce debt but still expecting to expand, we see the
capital expense remaining negative and decreasing.
Tenaris, like Cisco, has also been increasing their interest expense. We can see a decrease in
revenue but in 2017 they managed to increase that closer to their average. Their operating
expenses have also lowered from 2015. We expect to see an increase in these expenses next
year due to the increase of selling expenses such as freight because of higher shipment
volumes. Due to the increase in shipments this number should also increase revenue over time.
In 2016 we see a dramatic drop in long term debt and a drop in liabilities and common
stock and retained earnings remain steady. Sales have increased 52% since 2017 due to the
strong demand in the US and Canada according to Yahoo Finance. Tenaris has a clean balance
sheet that shows potential for growth.
When looking at the net income for Tenaris, we can see the huge increase over the last
three years. It’s important that they pay dividends because it shows that they have a
sufficient cash flow and a good cash management program. They have used their borrowed
money in a smart way since they have generated enough cash to cover these borrowings.
When looking at the economic and market report for Cisco, we see that Total revenue
increased 2% , with product revenue increasing 1% and service revenue increasing 2% . Total
gross margin decreased by 1.0 percentage points due to unfavorable impacts from pricing and a
$127 million legal and indemnification settlement charge, partially offset by productivity
benefits and favorable product mix.
As a percentage of revenue, research and development, sales and marketing, and general and
administrative expenses collectively increased by 0.2 percentage points. Operating income as a
percentage of revenue decreased by 0.3percentage points.
We had a net loss of $3.7 billion and a net loss per share of $0.76, primarily due to the $11.1
billion provisional tax expense related to the enactment of the Tax Cuts and Jobs Act (the “Tax
Act”), comprised of $8.9 billion of U.S. transition tax, $1.2 billion of foreign withholding tax, and
$1.0 billion of net deferred tax assets re-measurement.
When looking at the market, Cisco announced the initial development of new network product
offerings that feature our intent-based networking technology. Companies with which they
have added or expanded strategic alliances during fiscal 2018 and in recent years include Apple,
Google, Salesforce.com and Ericsson, among others.
Our recommendation for Cisco would be to Buy stocks in this moment that the price
went down due to the Trump's tariffs against china. The market is very volatile, and this is a
great time to take some risk and invest in the company based on the great ratios of this strong
and healthy tech company.
Our recommendation for Tenaris would be to keep your existing stocks. They have
stayed steady over the last five years and have good numbers, overall. If you were looking for a
bit of risk, we would suggest buying this stock since there has been a decent increase in sales in
2018 due to increased demand.