The “Internet of Things” essentially connects industrial and medical devices, vehicles, and an array of consumer and household products to allow for advanced monitoring, analytics, and more. Everyday products and machines can now be embedded with sensor technology to process data or interact with other electronic devices.
Consumer-level IoT products include things like Amazon’s AMZN Echo “smart speakers,” wearable motion and activity tracking products from the likes Apple AAPL, and advanced in-car technology. On the commercial side of the IoT market, industrial manufacturers have started to implement sensors into machines to track performance and efficiency
One of the more obvious plays here for investors is semiconductor stocks, as chipmakers should be able to benefit from the growth of connected devices. But chip stocks are often cyclical. With that said, IoT is set to become nearly ubiquitous, which means investors can try to profit from its growth in countless industries and firms.
Today we’ve highlighted three, Zacks buy-ranked stocks with growing IoT businesses that investors might want to consider at the moment.
1. Cisco Systems, Inc. CSCO
Cisco is a networking and tech powerhouse that has expanded its IoT business in recent years. The firm announced on Tuesday that it agreed to buy Acacia Communications ACIA for roughly $2.6 billion, its latest in a series of acquisitions. Cisco executives said the deal, which awaits regulatory approval, will help its hardware users drive more data over high-speed internet networks. In terms of the Internet of Things, the networking firm allows its customers to extend their connectivity in the toughest of environments and conditions, securely from the enterprise to the IoT Edge.
The San Jose, California-based company, which saw its 2018 revenues climb 3%, has seen its stock surge roughly 36% in 2019 to crush the S&P 500. CSCO shares currently hover just below their 52-week intraday high of $58.15. Looking ahead, our current Zacks Consensus Estimates call for Cisco’s adjusted Q4 fiscal 2019 earnings—which are due out in August—to jump over 17% on the back of 4.2% revenue growth. Cisco’s full-year fiscal 2019 EPS figure is expected to climb 18.5%, with its top-line projected to jump 5.1% to $51.86 billion. Cisco is also a dividend payer and holds a Zacks Rank #2 (Buy) at the moment, based on its upward earnings estimate revision activity for fiscal 2019 and 2020.
2. Honeywell International Inc. HON
Honeywell is one of the quintessential IoT firms. The Morris Plains, New Jersey-based firm makes smart, connected-household devices that include everything from thermostats to security offerings and much more. On top of that, the firm sells enterprise level IoT products and solutions for the aerospace industry, manufacturing, oil and gas, healthcare, and the list goes on. Honeywell posted better-than projected first quarter results that helped management feel confident enough to raise its Q2 and full-year 2019 guidance. Investors should note that HON’s revenue fell last quarter due, in large part, to the impact of spin-offs of some of its businesses.
With this in mind, Honeywell’s revenues jumped 8% organically last quarter on the back of strength in its long-cycle businesses such as U.S. defense, commercial aerospace, and warehouse and process automation. Like Cisco, HON stock has soared in 2019, up 35% to $175.52 per share in morning trading Friday to help it hover near its 52-week highs. Honeywell is also a dividend payer with a yield of at 1.88% at the moment. Honeywell is a Zacks Rank #2 (Buy) right now that sports a “B” grade for Growth and an “A” for Momentum in our Style Scores system. Honeywell is set to release its Q2 financial results on Thursday, July 18.
3. DexCom, Inc. DXCM
DexCom is a medical device firm that offers those with diabetes the chance to place a small sensor just beneath their skin to help them continuously monitor their glucose levels through a companion device, or via an application on compatible smartphones or smartwatches. Shares of DXCM have climbed 43% in the last 12 months, which includes a fair amount of volatility. Similar to Honeywell, DexCom reported stronger-than-expected Q1 results and lifted its full-year outlook.
The company’s adjusted second-quarter earnings, which are due out on July 31, are projected to jump from a loss of -$0.10 per share in the year-ago period to break-even. DXCM’s Q2 revenues are expected to climb 24.6%. Meanwhile, DexCom’s full-year earnings are projected to soar 167% to reach $0.80 per share, on roughly 25% revenue growth that would see it hit $1.29 billion. DexCom’s 2020 revenues are then projected to jump 19% above our 2019 estimates, with its 2020 EPS figure expected to soar 52% higher. DexCom is a Zacks Rank #1 (Strong Buy) right now that rocks an “A” grade for growth and has crushed our quarterly earnings estimates by an average of 150% in the trailing four periods.
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