(CS) Global Equity Strategy : focus on growth, yield and quality beta

We review our weightings within different investment styles. We reduce US small caps to benchmark from overweight (in line with the view of Lori Calvasina, Credit Suisse's US equity strategist). Furthermore:
I. We remain overweight growth as a style with a particular focus on quality growth.
II. Beta has rarely looked so cheap and we recommend high quality beta plays that are Outperform-rated by CS analysts.
III. We remain overweight dividend aristocrats, especially in Europe (though we reduce slightly our overweight of US dividend aristocrats).
IV. We remain benchmark European small caps and underweight UK small caps.

>>> What to look at today - 18th of August 2016 (full version)

Dow +0.12% S&P +0.19% Nasdaq +0.03% Russell -0.28%
US Market closed higher by 0.2% recovering from -0.5% loss. The future path of interest rate normalization remained in focus as investors looked to substantiate yesterday's somewhat hawkish remarks from New York Fed President Dudley (an FOMC voter) and Atlanta Fed President Lockhart (not an FOMC voter). The two fed officials pushed forward rate hike expectations, signaling that at least one rate hike remains possible before the end of the year. The market shifted gears shortly after midday as reports indicated that German Chancellor Merkel signaled that there would be some scope for tax cuts in the Germany's next legislative session. That headline seemed to stoke some risk appetite as investors eyed potential fiscal stimulus measures, which have been lacking in the midst of very aggressive monetary policy accommodations. The Fed minutes for July also helped to brush away lingering rate hike angst indicating that the Federal Open Market Committee was split on whether or not an interest rate hike would be appropriate in the coming months. Seven sectors ended in the green with industrials (+0.3%), financials (+0.4%), and utilities (+1.4%) leading the advance. The heavily-weighted health care sector (+0.2%) performed in-line with the market, but got a boost from M&A speculation. Volume were in line with average at 765 mil shares. US After Hours NTAP +6%, LB +3%, SNPS +2% on earnings/guidance, CIE +12% following insider buy disclosure... BGG -14%, ARAY -11%, A -5% following earnings/guidance. Another day of mixed trade in Asia with strong data out of the Philippines and Australia. USD continued a generally weaker trend, being mostly attributed to FOMC minutes, which failed to give a signal as to when the next rate hike could be. An article in the Nikkei explored the fact the yen has strengthened in August from the previous month in five out of the past nine years. The article attributes monetary policy developments in Japan and the US as part of the fuel for the speculative moves. Japan trade data showed a sharp decline in imports (-24.7%) and exports (-14.0%, 10 consecutive decline and largest decline since Oct 200). Japan PM Abe advisor Honda said the BoJ will likely take bold action next month; No need for BoJ to further lower negative deposit rate . Hong Kong and China markets generally trending higher with stronger earnings coming out of names like Lenovo.

Nikkei -1.57% Hang Seng +1.24% CSI -0.13% Shanghai -0.14%

EU$ 1.1320 CNH 6.6316 CNY 6.6259 JPY 99.84 GBP 1.3064 CHF 0.9598 RUB 63.6797 WTI$46.84 (-0.21%)

S&P +0.07% EuroStoxx +0.61% Dax +0.68% SMI +0.28%

Macro :
- Bullard Still Sees 1 Hike Through ’18, Need for New Approach
- Fed Officials Split in July on Whether Rate-Hike Needed Soon

Keep an eye on :
- ANA SM : Acciona Awarded 506 GWh/Year Contract in Chilean Auction
- T US : AT&T Follows Rivals, Ends Fees on Wireless Users Topping Limits
- BAMNB NA : BAM 1H Net Rises, Rev. in Line; Sees 2016 Adj. Result Above 2015
- BOKA NA : Boskalis 1H Net, Ebitda Beat Ests.; Sees 2H Net Approaching 1H
- CSCO US : Cisco Will Cut Up to 5,500 Positions; 4Q Adj. EPS Beats
- HEI GY : HeidelbergCement to Sell Some U.S. Assets for $660m
- SDF GY : K+S Expects First First Pre-Tax Loss of Millennium: FAZ
- KUD SW : Kudelski Raises 2016 Rev., Operating Income Outlook
- LSG NO : Leroy Seafood 2Q Revenue Beats Estimates; Net Income Misses
- MDLZ US : Mondelez to Invest >$100m in China Over 3 Yrs: China Daily
- MHG NO : Marine Harvest 2Q Net Misses on Financial Items; Div NOK3.20/Shr
- NESN VX : Nestle 1H Organic Sales Growth 3.5% vs Est. 3.7%, Keeps Outlook, Says Pricing to ‘Recover Somewhat’ in Coming Months
- NN NA : NN Group 2Q Operating Result Drops 34%, Interim Div. EU0.6/Share
- RBI AV : Raiffeisen 2Q Net Income Below Est.; Outlook Remains Unchanged
- SEM AV : Semperit 1H Rev. Dips, Margins Rise, Market Challenging in 2H
- SIX2 GY : Sixt 1H Revenue, Pretax Earnings Rise, Confirms FY Outlook
- STRA AV : Strabag CEO Sees 2016 Ebit EU390m-EU400m, WirtschaftsBlatt Says
- SREN VX : Swiss Re Cut to Sell at Citi, Hannover Re Upgraded to Buy
- TLW LN : Tullow Says TEN Delivers First Oil on Time and on Budget
- YHOO US : Hohn’s TCI Adding $2.4 Billion of Yahoo Tops Hedge Fund Buys
- VIV FP : Vivendi Seen Studying New Offer for Mediaset’s Premium: Sole
- VOW3 GY : Volkswagen Wolfsburg Plant Faces Shortened Work Shifts: Bild
- ZO1 GY : Zooplus Raises 2016 Sales Outlook, Keeps Pretax Forecast

>>> Europe : Brokers Upgrades & Downgrades - 18th of August 2016

>>> Up
*CYRUSONE RAISED TO OVERWEIGHT AT BARCLAYS
*GEA GROUP RAISED TO OUTPERFORM AT RBC CAPITAL
*HANNOVER RE RAISED TO BUY VS NEUTRAL AT CITI
*IMI RAISED TO OVERWEIGHT VS EQUALWEIGHT AT BARCLAYS
*UNIPRO RAISED TO BUY AT HSBC
*WILLIAM DEMANT RAISED TO BUY AT KEPLER CHEUVREUX

>>> Down
*AURORA LPG CUT TO HOLD VS BUY AT DNB MARKETS
*CAIRN ENERGY CUT TO NEUTRAL VS OUTPERFORM AT MACQUARIE
*CLOSE BROTHERS CUT TO HOLD VS BUY AT LIBERUM
*GLENCORE CUT TO NEUTRAL VS OUTPERFORM AT MACQUARIE
*HSBC CUT TO HOLD VS BUY AT BANKHAUS LAMPE
*HUFVUDSTADEN CUT TO SELL VS HOLD AT DNB
*SMA SOLAR CUT TO NEUTRAL VS BUY AT ODDO SEYDLER
*SWISS RE CUT TO SELL AT CITI
*TITAN CEMENT CUT TO HOLD VS BUY AT BERENBERG

>>> PT Change


>>> Initiation
*EDF RATED NEW OVERWEIGHT AT BARCLAYS, PT EU13.90

>>> Call
*US SMALL CAP CUT TO BENCHMARK AT CREDIT SUISSE

>>> What to look at today - 18th of August 2016

Dow +0.12% S&P +0.19% Nasdaq +0.03% Russell -0.28%
US Market closed higher by 0.2% recovering from -0.5% loss. The future path of interest rate normalization remained in focus as investors looked to substantiate yesterday's somewhat hawkish remarks from New York Fed President Dudley (an FOMC voter) and Atlanta Fed President Lockhart (not an FOMC voter). The two fed officials pushed forward rate hike expectations, signaling that at least one rate hike remains possible before the end of the year. The market shifted gears shortly after midday as reports indicated that German Chancellor Merkel signaled that there would be some scope for tax cuts in the Germany's next legislative session. That headline seemed to stoke some risk appetite as investors eyed potential fiscal stimulus measures, which have been lacking in the midst of very aggressive monetary policy accommodations. The Fed minutes for July also helped to brush away lingering rate hike angst indicating that the Federal Open Market Committee was split on whether or not an interest rate hike would be appropriate in the coming months. Seven sectors ended in the green with industrials (+0.3%), financials (+0.4%), and utilities (+1.4%) leading the advance. The heavily-weighted health care sector (+0.2%) performed in-line with the market, but got a boost from M&A speculation. Volume were in line with average at 765 mil shares. US After Hours NTAP +6%, LB +3%, SNPS +2% on earnings/guidance, CIE +12% following insider buy disclosure... BGG -14%, ARAY -11%, A -5% following earnings/guidance.



Macro :
- Bullard Still Sees 1 Hike Through ’18, Need for New Approach
- Fed Officials Split in July on Whether Rate-Hike Needed Soon


Keep an eye on :
- ANA SM : Acciona Awarded 506 GWh/Year Contract in Chilean Auction
- T US : AT&T Follows Rivals, Ends Fees on Wireless Users Topping Limits
- BAMNB NA : BAM 1H Net Rises, Rev. in Line; Sees 2016 Adj. Result Above 2015
- BOKA NA : Boskalis 1H Net, Ebitda Beat Ests.; Sees 2H Net Approaching 1H
- CSCO US : Cisco Will Cut Up to 5,500 Positions; 4Q Adj. EPS Beats
- SDF GY : K+S Expects First First Pre-Tax Loss of Millennium: FAZ
- KUD SW : Kudelski Raises 2016 Rev., Operating Income Outlook
- LSG NO : Leroy Seafood 2Q Revenue Beats Estimates; Net Income Misses
- MDLZ US : Mondelez to Invest >$100m in China Over 3 Yrs: China Daily
- MHG NO : Marine Harvest 2Q Net Misses on Financial Items; Div NOK3.20/Shr
- NESN VX : Nestle 1H Organic Sales Growth 3.5% vs Est. 3.7%, Keeps Outlook, Says Pricing to ‘Recover Somewhat’ in Coming Months
- NN NA : NN Group 2Q Operating Result Drops 34%, Interim Div. EU0.6/Share
- RBI AV : Raiffeisen 2Q Net Income Below Est.; Outlook Remains Unchanged
- SEM AV : Semperit 1H Rev. Dips, Margins Rise, Market Challenging in 2H
- SIX2 GY : Sixt 1H Revenue, Pretax Earnings Rise, Confirms FY Outlook
- STRA AV : Strabag CEO Sees 2016 Ebit EU390m-EU400m, WirtschaftsBlatt Says
- YHOO US : Hohn’s TCI Adding $2.4 Billion of Yahoo Tops Hedge Fund Buys
- VOW3 GY : Volkswagen Wolfsburg Plant Faces Shortened Work Shifts: Bild
- ZO1 GY : Zooplus Raises 2016 Sales Outlook, Keeps Pretax Forecast

>>> After Hours Summary: NTAP +6%, LB +3%, SNPS +2% on earnings/gui


After Hours Summary: NTAP +6%, LB +3%, SNPS +2% on earnings/guidance, CIE +12% following insider buy disclosure... BGG -14%, ARAY -11%, A -5% following earnings/guidance

After Hours Gainers:

Companies trading higher in after hours in reaction to earnings/guidance: NTAP +5.7%, YY +3.2% (also announces Chairman resignation / promotion of Zhou Chen as new CEO), LB +3%, SNPS +1.6%, CACI +0.3% (light volume)

Companies trading higher in after hours in reaction to news: CIE +12.4% (CFO and CEO each disclosed purchase of 100000 shares)

After Hours Losers:

Companies trading lower in after hours in reaction to earnings/guidance: BGG -14.1%, ARAY -11%, KEYS -8.2%, A -4.8%, CSCO -1.4% (also discloses restructuring plan, will eliminate up to 5,500 positions, representing ~7 percent of its global workforce)

Companies trading lower in after hours in reaction to news: CERU -64.2% (announces top-line results from its Phase 2 trial of its lead candidate, CRLX101, in combination with Avastin; demonstrated no statistically significant difference in median PFS), OMED -10.3% (announces proposed public offering of common stock), PTLA -4.1% (following afternoon sell-off / halt), UIHC -1.4% (ticking lower following resumption - entered into all-stock merger agreement with RDX Holding), SCTY -0.8% (ticking lower - adopts and begins implementing initiatives to realign operating expenses to match the reduced guidance for Megawatts Installed)

>>> Asian Update

Asia Mid-session Market Update: Yen tests ¥99.65, officials warn on excessive moves; Aussie rises to 0.7718 on better employment data


***Economic Data***
- (AU) AUSTRALIA JULY EMPLOYMENT CHANGE: +26.2K V +10.0KE; UNEMPLOYMENT RATE: 5.7% V 5.8%E
- (CN) CHINA JULY PROPERTY PRICES M/M: FALL IN 16 OUT OF 70 CITIES VS FALL IN 10 PRIOR; Y/Y: FALL IN 11 OUT OF 70 CITIES V FALL IN 12 PRIOR
- (NZ) NEW ZEALAND JULY ANZ JOB ADVERTISEMENTS M/M: 1.4% V 0.5% PRIOR
- (JP) JAPAN JULY TRADE BALANCE: ¥513.5B V ¥273.2BE; ADJ TRADE BALANCE: ¥317.6B V ¥167.7BE
- (NZ) NEW ZEALAND AUG ANZ CONSUMER CONFIDENCE INDEX: 117.7 V 118.2 PRIOR; M/M:-0.4% V -0.6% PRIOR
- (PH) PHILIPPINES Q2 INDUSTRIAL PRODUCTION 6.9% Y/Y; CONSUMER SPENDING 7.3% Y/Y
- (PH) PHILIPPINES Q2 GDP Q/Q: 1.8% V 1.8%E; Y/Y: 7.0% V 6.6%E
- (AU) Australia July RBA Gross FX Transactions (A$): -0.5B v -1.7B prior
- (JP) Japan investors bought net ¥1.30T in foreign bonds v bought ¥892B in prior week; Foreign investors bought net ¥94.7B in Japan stocks v sold ¥492B in Japan stocks in prior week

***Index Snapshot (as of 03:30 GMT)***
- Nikkei225 -0.2%, S&P/ASX -0.6%, Kospi +0.5%, Shanghai Composite +0.1%, Hang Seng +1.7%, Sep S&P500 +0.1% at 2,182

***Commodities/Fixed Income***
- Dec gold +0.7% at $1,358/oz, Sep crude oil -0.1% at $46.72/brl,; Sep copper +0.2% at $2.17/lb; Sept Silver +1.05% at $19.85/oz
- (CN) PBOC SETS YUAN MID POINT AT 6.6273 V 6.6056 PRIOR
- (CN) PBOC to inject CNY50B in 7-day reverse repos
- (NZ) New Zealand sells NZ$150M v NZ$150M indicated in 2.75% 2025 Bonds; avg yield 2.0408%
- (JP) Japan MoF sells ¥385.7B in 3-month bills; avg yield -0.2341%; bid-to-cover 3.85x
- (JP) Japan MoF sells ¥221B in 5-yr bonds; avg yield -0.1650%; bid-to-cover 3.5x

***Market Focal Points/FX***
- Another day of mixed trade in Asia with strong data out of the Philippines and Australia. USD continued a generally weaker trend, being mostly attributed to FOMC minutes, which failed to give a signal as to when the next rate hike could be. USD/JPY tested ¥99.65, MoF's Asawaka for the second consecutive session warned on excessive fx moves. An article in the Nikkei explored the fact the yen has strengthened in August from the previous month in five out of the past nine years. The article attributes monetary policy developments in Japan and the US as part of the fuel for the speculative moves. Japan trade data showed a sharp decline in imports (-24.7%) and exports (-14.0%, 10 consecutive decline and largest decline since Oct 200). Japan PM Abe advisor Honda said the BoJ will likely take bold action next month; No need for BoJ to further lower negative deposit rate .

- Hong Kong and China markets generally trending higher with stronger earnings coming out of names like Lenovo. China July property prices showed fewer cities recording m/m gains, major cities showed more frequent increases on existing homes than new. Chinese Academy of Social Sciences (CASS) issued a report saying industrial growth may slow to 5% in June 2017 v 5% in H1 2016. Also said, China should stabilize property market while keeping its proactive fiscal policy and prudent monetary policy.

- AUD/USD tipped 0.7718 (2-day high) after Australia employment data beat expectations. Part time employment saw a huge jump to +71.6K from -33.2K prior and full time was -45.4K from +44.0K prior.

***Equities***
US equities / ADRs:
- NTAP: Reports Q1 $0.46 v $0.36e, R$1.29B v $1.26Be; +7.5% afterhours
- LB: Reports Q2 $0.70 v $0.59e, R$2.89B v $2.87Be; +3.0% afterhours
- NTES: Reports Q2 $3.70 (unclear if comp) v $2.56e, R$1.35B v $1.27Be; Raises dividend 6.8% from $0.73 to $0.78 (implied yield 1.5%); +2.7% afterhours
- CACI: Reports Q4 $2.35 adj v $2.19 y/y, R$1.11B v $1.10Be; +0.3% afterhours
- CSCO: Reports Q4 $0.63 v $0.60e, R$12.6B v $12.5Be; to eliminate up to 5.5K positions (7% of global workforce); -1.4% afterhours
- A: Reports Q3 $0.49 v $0.47e, R$1.04B v $1.04Be; -4.2% afterhours
- CERU: Phase 2 clinical trial of CRLX101 and Avastin combination in Relapsed Renal Cell Carcinoma demonstrated no statistically significant difference; -61.0% afterhours

Notable movers by sector:
- Consumer discretionary: Treasury Wine Estates TWE.AU +11.6%(FY16 result); Nexteer Automotive Group 1316.HK +23% (H1 result); Tatts Group TTS.AU -0.4% (FY16 result); Sydney Airport SYD.AU +0.1% (H1 result)
- Consumer staples: Don Quijote Co 7532.JP +0.8% (annual result)
- Financials: Ping An Insurance 2318.HK +4.0% (H1 result); Everbright Securities Co 6178.HK flat at open (H-share debut)
- Industrials: China Railway Signal & Communication Corporation 3969.HK +2.3% (H1 result); Doshisha Co 7483.JP +3.2% (share buyback)
- Technology: Tencent Holdings 700.HK +5.9% (Q2 result); Kingdee International Software Group Co 268.HK 12.9% (H1 result); Lenovo Group 992.HK +3.4% (Q1 result); IRESS IRE.AU +8.8%(H1 result); Brambles BXB.AU 0.7% (FY16 result)
- Materials: Evolution Mining EVN.AU +5.2%; Saracen Mineral SAR.AU +3.2% (gold rises); Whitehaven Coal WHC.AU +3.9% (FY16 result)
- Energy: China Coal Energy 1898.HK -0.3% (July result); Origin Energy ORG.AU -2.2% (FY16 result)
- Healthcare: Shandong Weigao Group Medical Polymer 1066.HK -3.5% (H1 result); Guangzhou Baiyunshan Pharmaceutical Holdings Co 874.HK -4.1% (H1 result)
- Telecom: China Unicom 762.HK +7.0% (H1 result)
- Utilities: Yokogawa Electric Corp 6841.JP -2.4% (Credit Suisse cuts to Neutral); Softbank 9984.JP -4.5% (said still hold out hope for deal with T-mobile)

>>> US Close Dow +0.12% S&P +0.19% Nasdaq +0.03% Russell -0.28%

Closing Market Summary: Averages Rebound Following FOMC Minutes

The stock market ended the midweek affair on a flat note as market participants walked back recently-adjusted rate hike expectations for the year. The change in thinking followed some dovish remarks from St. Louis Fed President Bullard (an FOMC voter) and less hawkish-than-feared minutes from the FOMC's July meeting. The S&P 500 (+0.2%) settled above its flat line, recovering from a 0.5% loss intraday.

The future path of interest rate normalization remained in focus as investors looked to substantiate yesterday's somewhat hawkish remarks from New York Fed President Dudley (an FOMC voter) and Atlanta Fed President Lockhart (not an FOMC voter). The two fed officials pushed forward rate hike expectations, signaling that at least one rate hike remains possible before the end of the year.

The prospect of a sooner-than-expected rate hike was enough to keep buying interest under wraps through the first half of trade. Vacillating oil prices, some strengthening in the dollar, and weakness in the heavily-weighted consumer discretionary (-0.3%) and technology (-0.3%) sectors also helped keep the broader market in check.

The market shifted gears shortly after midday as reports indicated that German Chancellor Merkel signaled that there would be some scope for tax cuts in the Germany's next legislative session. That headline seemed to stoke some risk appetite as investors eyed potential fiscal stimulus measures, which have been lacking in the midst of very aggressive monetary policy accommodations.

St. Louis Fed President Bullard (an FOMC voter) also helped elicit some buying interest after he suggested that the Fed may only be likely to raise rates one time between now and late 2018. The comments echoed remarks made by Mr. Bullard in the past, citing trend growth remaining under 2.0%.

The Fed minutes for July also helped to brush away lingering rate hike angst.

The minutes indicated that the Federal Open Market Committee was split on whether or not an interest rate hike would be appropriate in the coming months. The committee agreed that economic data and labor markets had improved, but the sustainability of hiring and inflation continuing to run below the two percent objective worried some members. Several members said they preferred to defer another increase in the fed funds rate until they were more confident that inflation was moving closer to two percent on a sustained basis.

The market's initial impression of the minutes skewed toward the dovish side of things, evidenced by a downturn in the CBOE Volatility Index (VIX 12.21, -0.43, -3.4%), a dip in the U.S. Dollar Index (94.78, -0.02, -0.02%), an uptick in Treasury prices across the curve, and an upturn in the S&P 500 utilities sector (+1.5%) after their release.

The S&P 500 finished the session near its high, finding technical support near the 2168 price level, which marked a rising 20-day moving average.

Seven sectors ended in the green with industrials (+0.3%), financials (+0.4%), and utilities (+1.4%) leading the advance. The heavily-weighted health care sector (+0.2%) performed in-line with the market, but got a boost from M&A speculation. Medivation (MDVN 66.48, +1.26) jumped 1.9% after the company confirmed that it received indications of interest from several parties. Biotechnology heavyweight Gilead Sciences (GILD 80.70, +1.45) climbed 1.8%, trimming its post-earnings loss to 8.9%.

In the consumer discretionary space (-0.2%), retail names underperformed as Lowe's (LOW 76.88, -4.60) and Target (TGT 70.63, -4.58) declined by 5.6% and 6.4%, respectively. The two came under pressure after disappointing investors with their quarterly results and/or guidance. Wal-Mart (WMT 72.93, +0.04) ended higher by 0.1% ahead of tomorrow morning's earnings report.

The technology sector (-0.1%) ended the day modestly lower as Dow component Cisco Systems (CSCO 30.72, -0.40) pressured the group. Cisco fell 1.3% after reports indicated that the company might be planning to layoff between 9,000 and 14,000 employees. The company is scheduled to report earnings after today's close. The high-beta chipmakers finished the day flat as Analog Devices (ADI 64.20, -0.68) weighed on the PHLX Semiconductor Index (UNCH). The stock fell 1.1% despite beating quarterly estimates and issuing in-line guidance for the fourth quarter.

Treasuries ended the day on a higher note, enjoying a decent bid across the complex. The yield on the 10-yr note slipped two basis points to 1.55%.

Today's participation was below the recent average as fewer than 765 million shares changed hands at the NYSE floor. 

Today's economic data included the weekly MBA Mortgage Index: 

  • The MBA Mortgage Index showed that mortgage applications fell 4.0% in the week ending August 13 after a 7.1% increase in the prior week. 

Tomorrow's economic data will include weekly initial claims (consensus 265k) and the Philadelphia Fed Survey for August (consensus 0.5), which will each be released at 8:30 a.m. ET. The Leading Indicators report for July (consensus 0.4%) will conclude the day's data, crossing the wires at 10:00 a.m. ET. 

  • Russell 2000 +8.1% YTD
  • S&P 500 +6.8% YTD
  • Dow Jones +6.6% YTD
  • Nasdaq Composite +4.4% YTD

>>> Cisco Systems beats by $0.03, reports revs in-line; guides Q1 EPS in-line, r

Cisco Systems beats by $0.03, reports revs in-line; guides Q1 EPS in-line, revs below consensus 
--> -1.3% in after hours

Reports Q4 (Jul) earnings of $0.63 per share, excluding non-recurring items, $0.03 better than the Capital IQ Consensus of $0.60; revenues fell 1.6% year/year to $12.64 bln vs the $12.57 bln Capital IQ Consensus.
* Revenue by geographic segment:
- Americas up 3%
- EMEA up 3%
- APJC down 2%
* Product Revenue
- Security at 16%
- Collaboration, Wireless and Switching product revenue increased by 6%, 5%, and 2%, respectively
- Service Provider Video, NGN Routing and Data Center product revenue decreased by 12%, 6%, and 1%, respectively
* Non-GAAP total gross margin and product gross margin were 64.6% and 63.9% (Guidance for 63-64%), respectively. The increase in non-GAAP product gross margin compared with 63.2% in the fourth quarter of fiscal 2015 was primarily due to continued productivity improvement and to a lesser extent product mix, partially offset by pricing.
- Deferred Revenue was $16.5 billion, up 8% in total, with deferred product revenue up 8%, driven largely by subscription-based and software offerings, and deferred service revenue was up 9%.
- Product Backlog was approximately $4.6 billion at the end of fiscal 2016, an increase of 1% compared with the balance at the end of fiscal 2015 (excluding the SP Video CPE Business).
- Days Sales Outstanding in Accounts Receivable (DSO) was 42 days at the end of the fourth quarter of fiscal 2016, compared with 38 days at the end of the fourth quarter of fiscal 2015.
* Co issues guidance for Q1, sees EPS of 0.58-0.60, excluding non-recurring items, vs. $0.60 Capital IQ Consensus Estimate; sees Q1 revs of -1-1% y/y (Approx $12.15-12.39 bln) vs. $12.49 bln Capital IQ Consensus Estimate. Revenue normalized to exclude SP Video CPE Business for Q1 FY2016)
* Sees Q1 Gross Margin in the range of 63-64%.